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Is a higher minimum wage the answer?

This week, President Barack Obama spoke on raising the minimum wage at the University of Michigan, in advance of a minimum-wage vote that could hit the Senate floor as early as next week.

“It would lift millions of people out of poverty, right away,” the president said, of his proposal. “It would help millions more work their way out of poverty, right away.”

Nationally, Obama wants to increase the hourly minimum wage from $7.25-$10.10, as part of an economic agenda focused on working families.

Economist Arin Dube came out with a paper entitled “Minimum Wages and the Distribution of Family Incomes” recently, which economist Mike Konczal dissected in the Washington Post, this past January.

“Raising the minimum wage 10 percent (say from $7.25 to near $8) would reduce the number of people living in poverty 2.4 percent,” Konczal wrote.

For example, raising the minimum wage to $10.10 per hour would reduce the number of people living in poverty by 4.6 million, nationwide. It would also boost the incomes of those at the 10th percentile by $1,700.

That’s a pretty good chunk of change, with hardly any administrative costs, and provides a complement to government programs such as the Earned Income Tax Credit many of us applied to get back this tax season, food stamps, Medicaid and other similar programs. But can a family that’s living on a minimum wage income become less dependent on those programs, if that wage is raised? Maybe, but there are other factors at play.

The Post also cites a 2011 paper by minimum-wage opponent David Neumark that posited that raising the minimum wage 10 percent would reduce poverty 2.9 percent for 21-44-year-old family heads or individuals.

While Obama’s State of the Union address called for a $9 federal minimum by 2015, the proposed bill represents a steeper hike. California, New York, Connecticut, Rhode Island and New Jersey voted to raise state minimums, last year and last August, fast-food workers in almost 60 cities struck or walked out, in a bid for starting pay of $15 an hour.

A Gallup poll in November found that 76 percent of Americans would vote for a $9 federal wage floor.

So, what does all of this mean for the average worker? America’s minimum wage is 27 percent of the U.S. average pay, a lower ratio than that of any other member of the Organisation for Economic Co-operation and Development except Mexico.

Some background: In 1968, when the U.S. minimum wage hit its inflation-adjusted peak of $10.70 an hour, 81 percent of men aged 20 and older had jobs. Now, 67 percent do.

Does this mean more Americans are depending on government aid than work to get by, or that there are fewer jobs to be found, or that more people are seeking welfare than jobs that don’t pay enough to feed their families, anyway? Depends on the stats you consult. Raising minimum wage is one step, but it will only help those who have jobs, in the first place. And even then, the increase still may not be enough to help Americans feed their families without government assistance, or to encourage those who live on that assistance to take those jobs. It’s a complex problem, but one our government needs to examine, from all its many angles.

As Konczal put it, “A higher wage floor is right for low-skilled workers and harmless to the economy. But it’s only one piece of a very large economic puzzle.”

“You’ve got a choice. You can give America the shaft, or you can give it a raise,” Obama said.

I wouldn’t quite say that, Mr. President. But it’s something our government needs to think about, as one step on the road to getting Americans back to work and back on their feet, wherever those feet are standing.
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