Even in a first world country like the United States poverty is still a concern for millions of Americans. In 2015 the U.S. Census Bureau found that forty three million Americans were living under the poverty level. The 2015 Gini index was 0.479, noting a high income inequality. Protests have sprung across the country to raise the minimum wage to a livable wage because while conventionally teenagers are thought of as working minimum wage jobs, ninety percent of the workers who would get a raise from a minimum wage increase to $12/hour are over age 20. Families with single parents working fulltime at minimum wage still live under the poverty level. The US federal government should increase the federal minimum wage. Even a moderate increase
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An argument against this is that 57 percent of poor families don’t work and 46 percent have hourly wages over $10.10 but are poor because of low hours based on 2014 data from the Current Population Survey. If such is the case then in theory only 15 percent of the benefits of an increase in minimum wage to $12 would go to poor families and 35 percent would to go families living over three times the poverty line. An alternative proposed is the earned income tax credit (EITC) that subsidizes income through a tax return, decreasing as income rises. Since the EITC takes income into consideration it can affect poor families more effectively. Another argument is that since you have to work in order to receive EITC it offers pro-work incentives and more poor families, especially mothers will enter the labor market so poor families will actually “earn their way out of poverty even before receiving their EITC check.” However, this way of thinking has roots since the 1976 myth of the racial idea of the “welfare queen”, a black woman who frauds the government and taxpayers by living off welfare from producing more children. The condescending undertone implies that poor families, disproportionately Hispanics, blacks, and women, choose not to work and instead live off welfare from taxpayer dollars, just like the welfare queen. Simple labor economic theory disputes this racial under toned way of thinking. The assumption that poor families do not work because they want to live off welfare is wrong. The way welfare is structured leads to poor families working fewer hours or not at all. A poor family’s budget constraint and labor supply curve shows that because they have nonworking income through welfare their reservation wage, wage that would incentivize them to work, is higher than those without nonworking income. Such is also the case also with those who have nonworking income through trusts.
An argument against this is that 57 percent of poor families don’t work and 46 percent have hourly wages over $10.10 but are poor because of low hours based on 2014 data from the Current Population Survey. If such is the case then in theory only 15 percent of the benefits of an increase in minimum wage to $12 would go to poor families and 35 percent would to go families living over three times the poverty line. An alternative proposed is the earned income tax credit (EITC) that subsidizes income through a tax return, decreasing as income rises. Since the EITC takes income into consideration it can affect poor families more effectively. Another argument is that since you have to work in order to receive EITC it offers pro-work incentives and more poor families, especially mothers will enter the labor market so poor families will actually “earn their way out of poverty even before receiving their EITC check.” However, this way of thinking has roots since the 1976 myth of the racial idea of the “welfare queen”, a black woman who frauds the government and taxpayers by living off welfare from producing more children. The condescending undertone implies that poor families, disproportionately Hispanics, blacks, and women, choose not to work and instead live off welfare from taxpayer dollars, just like the welfare queen. Simple labor economic theory disputes this racial under toned way of thinking. The assumption that poor families do not work because they want to live off welfare is wrong. The way welfare is structured leads to poor families working fewer hours or not at all. A poor family’s budget constraint and labor supply curve shows that because they have nonworking income through welfare their reservation wage, wage that would incentivize them to work, is higher than those without nonworking income. Such is also the case also with those who have nonworking income through trusts.