Bob's Words of Wisdom News

Minimum Wage Increase vs Grocery Tax Repeal

Rep. Sue Chew is a pharmacist and she should stick to filling prescriptions and stop medaling with economics, which she has just proven to us that she knows nothing about with her introduction of a minimum a wage bill in the Idaho legislature.

There are several states that have increased their state minimum wages to $15 an hour, and they have found no difference in raising the poverty level of its citizens. These mandated increases do more harm than good, and they hurt the exact groups of people that policymakers want to help. Statistical research done at San Diego State University “found no evidence that minimum wage increases were effective at reducing overall poverty rates or poverty rates among workers.” Other studies have found that some poor workers who kept their jobs after minimum wage increases were lifted out of poverty; but, by the same token, others lost their jobs and fell into poverty. Increasing the minimum wage is not something that will solve the poverty problem.

There are two key reasons why the minimum wage does not alleviate overall poverty.

Reason number one is that minimum wages reduce the work available for low-skill workers: Businesses that employ unskilled workers will tend to move toward automated alternatives like self-checkouts or higher skilled labor. The hours for minimum wage employees will be cut lowering their income and raising the poverty levels of those households. Statistically speaking, a 10 percent increase in the minimum wage reduces low-skilled employment by one to three percent.

Reason number two that minimum wages do not relieve poverty in that few beneficiaries of minimum wage increases live in poor households. Census data found that workers earning between $7.25 and $10.10 per hour—in other words, those workers who would be directly affected by [a] proposed federal minimum wage increase—overwhelmingly live in non-poor households. Only 13 percent of those workers who would be affected live in poor households, while nearly two-thirds live in households with incomes over twice the poverty line, and over 40 percent live in households with incomes over three times the poverty line.

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If the Legislature really wants to help those in the lower income brackets, they would be better off eliminating the Grocery Tax (the sales tax on groceries) that affects everyone in the low-income brackets more than any other group in the state. The fallacy of the do-gooders in our legislature is they are looking for ways to lift our citizens out of poverty through more government intervention when what we really need is less government intervention.

If you really want to lower the poverty level, let the free market work and get rid of all of these onerous taxes that adversely affect those who are at or below the poverty level. More government intervention is not the answer to fixing poverty or higher wages. Our state gives all kinds of special exemptions on payment of sales taxes, and the legislature could easily shift the burden of the grocery tax by eliminating these special exemptions for the crony politicians’ friends and campaign contributors. Using that money to pay for the repeal of the grocery tax would go a long way toward helping those in the lower income brackets.

This is something Congressman Labrador talked about when he was running for governor and wanted to lower all taxes across the board to 5% for everyone. I would ask the legislature to do the right thing and forget about this dumb minimum wage bill and proceed to get rid of the grocery tax if they truly want to help those who earn lower wages. Let us not forget this quote by world-renowned Economist Milton Friedman, “One of the great mistakes is to judge policies and programs by their intentions rather than their results.”

“We Get the Government We Deserve.”

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