By: James Sherk

8 October 2004 Just Say No: Why Christians should oppose the minimum wage

What is a fair day's wage? Many Christians, looking at the working poor, at people who work hard at a full time job but are still below the poverty line, conclude that employers are exploiting these workers. Looking to the Bible they find verses like Deuteronomy 24:14-15 in which the Lord tells the Israelites that they "shall not oppress a hired servant who is poor and needy, whether he is one of your countrymen or one of your aliens who is in your land in your towns. You shall give him his wages on his day before the sun sets." Again the Lord warns "I will draw near to you for judgment; and I will be a swift witness against … those who oppress the wage earner in his wages …" (Malachi 3:5). Seeing a Biblical command to avoid oppressing wage earners, many Christians conclude that the government should force employers to pay their workers more by raising the minimum wage. Other Christians go even farther and support "living wage" requirements, requiring employers to pay a wage that lifts full time workers above the Federal poverty level for a family of four, usually requiring raising the minimum wage to between $9 and $12 an hour.

Christians have pushed to raise the minimum wage
Mainstream Christians have embraced this cause, and have been effective in pushing local governments to impose "living wage" requirements. The United Methodist Church affirms "Every person has the right to a job at a living wage" (1). The current national push to establish living wages was started in Maryland by Baltimoreans United for Leadership Development, a group led by local churches (2). In 1996 Episcopal ministers helped lead the successful fight to impose a living wage in Los Angeles (3). Further, Sen. John Kerry has made raising the minimum wage to $7 an hour part of his platform in his Presidential campaign, making this an issue all Christians should consider when choosing whom to vote for.

Christians who support raising the minimum wage or imposing living wage requirements do so because they believe that this will help the working poor. While it is clear that God instructs his servants to willingly help the poor, nothing in the New Testament suggests that this Christian duty can or should be written into the law. There are good reasons not to pass such laws. Unlike charitable donations, government regulations have unavoidable side effects on the economy. Christians truly concerned with helping the poor should oppose minimum wage laws, not attempt to increase them.

The Minimum Wage Destroys Jobs
How can laws that force companies to pay more hurt workers? Because no matter what laws the government passes, the true minimum wage in the economy will always be $0.00 an hour - what workers earn when they are unemployed. Minimum wage laws force companies to pay their workers more, but they do not force companies to hire those workers in the first place. And no company that wants to avoid bankruptcy will hire an employee whose work creates less revenue for the firm than the employee takes out in the form of wages.

Take the example of a restaurant owner considering hiring someone to help the cook prepare the meals each night. Jim applies for the position, but has no prior job experience. The restaurant owner knows that hiring an inexperienced employee like Jim will increase her profits by $6 an hour. The owner will be willing to pay Jim any wage up to $6 an hour, since at those wages she still earns more money by hiring Jim than by not hiring him. If Jim is willing to work for less than $6 an hour the owner will hire him, he will have a job, her restaurant will earn more money, and they will both be better off. If, however, the state has living wage regulations that force the owner to pay her workers at least $10 an hour, she will never offer Jim a job. Hiring Jim would mean she would have to pay him $10 each hour he worked when his labor had only increased revenue by $6. Despite Jim's willingness to work hard, the owner would still lose $4 an hour by hiring him, and thus she will not offer him a job at those wages.

The example of the restaurant owner may seem trivial but it illustrates a fundamental economic truth: companies will not pay their employees more than they are worth. Government regulations that force businesses to pay workers a minimum wage guarantee that no company will hire anyone whose does not increase revenue by at least the minimum wage.

Instead, the companies find other ways to get the jobs done. In some cases they hire more skilled and productive workers (4). In others they purchase machines to do the work instead. Or they might outsource the labor to overseas workers who aren't covered by minimum wage laws. At other times they reduce benefits like health coverage that aren't counted towards minimum wage requirements. Other companies simply cut back and make do with fewer workers. In no case, however, will businesses hire additional workers if it means losing money. Raising the minimum wage inevitably means raising unemployment.

The belief that raising the minimum wage reduces employment is more than an economic theory - it is a fact. Over 80 economic studies have shown that increases in the minimum wage result in fewer jobs (5). Economic studies further demonstrate that, on average, a ten percent increase in wages causes employment among workers earning those wages to drop by five percent (6). Sen. Kerry's proposal to raise the federal minimum wage to $7.00 from the current $5.15, a 36 percent increase, would cause 18 percent of current minimum wage workers to lose their jobs. Forcing companies to pay a living wage of $10.30 an hour would only allow half of all current minimum wage workers to live off of it. The other half would lose their jobs.

The Minimum Wage Stops the Poor From Gaining Work Experience
The damage done by the minimum wage does not stop at simply causing job losses. Many minimum wage jobs are entry-level positions filled by employees with limited skills and experience. These jobs provides the workers with experience that makes them more productive employees who can produce more and earn higher wages in the future, allowing them to lift themselves out of poverty (7). Raising the minimum wage reduces the number of entry-level jobs that are the first step out of poverty for low income Americans.

Most Minimum Wage Workers Are Not Poor
For all that the minimum wage does to eliminate jobs, some Christians still support it because they believe it is the only way that those workers who do get jobs can earn a decent living. This is simply incorrect. Many workers who earn the minimum wage are teenagers or college students working part-time and do not need to support a family. Others are married and have a spouse who also has a job. In fact most minimum wage workers are not poor, and though they undoubtedly would appreciate higher wages, they do not need them to avoid poverty. Census data reveals that the average family income of American workers who earn less than $6.65 an hour is over $40,000 a year. Only fifteen percent of these workers are members of poor households while, twenty percent belong to households that earn more than $80,000 a year (8). Though many minimum wage workers live in poverty, the vast majority of them do not.

Additionally, the government spends tens of billions of dollars each year to help the lower income Americans who are poor. The Earned Income Tax Credit program provides virtually every minimum wage earner in a poor household with substantial cash rebates. President Bush has passed a $1,000 a child refundable tax credit, which means that for each child in their family, impoverished parents who don't earn enough to pay income taxes will still receive $1,000 in cash refunds from the government (9). The government spends hundreds of billions of dollars more each year to provide poor Americans with subsidized food, housing, and health care. It makes little sense to support living wage laws, which destroy hundreds of thousands of jobs and only indirectly help poor families, when programs like these directly benefit the poor without increasing unemployment.

Wages Will Rise Without Government Interference
Christians who support raising the minimum wage should also consider the fact that they are totally unnecessary. Businesses already voluntarily give minimum wage workers substantial raises - once they have gained the on the job experience that makes them more valuable employees. A worker who started out earning the minimum wage between 1998 and 2002 saw his or her wages rise by an average of 10.4% within a year of being hired (10). During these years the federal government did not pass any new minimum wage increases. The workers saw their wages rise because many minimum wage jobs are entry-level positions and are filled by people with little experience in the workforce. Once they gain experience in their jobs they become more productive and companies pay them the higher wages they have earned. When the government forces businesses to pay all workers a minimum wage, regardless of their experience level, businesses will hire far fewer inexperienced workers and reduce the number of entry-level jobs they offer.

Sen. Kerry and Christians who support higher minimum wage or living wage laws want to help the poor earn more, not throw them out of work. But good intentions are not enough. In the words of James, "If a brother or sister is without clothing and in need of daily food, and one of you says to them, 'Go in peace, be warmed and be filled,' and yet you do not give them what is necessary for their body, what use is that"(11)? Similarly, Christians should not support policies intended to help the poor if they actually make the poor worse off. The poor do not need a legislated minimum wage because workers already earn substantial raises as they gain experience. The poor do not receive most of the benefits from raising the minimum wage - the middle class families with at least one family member working a minimum wage job do. But the poor are the ones who suffer the most when the minimum wage destroys jobs. And the poor are the very people who most desperately need the entry-level jobs that the minimum wage eliminates. Christians who want to help the poor should look beyond their intentions to the actual effects of their actions, and oppose minimum wage and living wage regulations.

(1) Social Principles, 2000 Book of Resolutions, p. 55. Excerpt found online at: http://www.nicwj.org/pages/issues.LWC.html#Resources

(2) "Keeping the Poor Poor: The Dark Side of the Living Wage." Oct 21st, 2003. Cato Policy Analysis. By Carl F. Horowitz. Pg. 3. http://www.cato.org/pubs/pas/pa493.pdf

(3) A Global Witness of Hope. Richard W. Gillett http://thewitness.org/agw/gillett.html

(4) Often these highly skilled workers are unionized, which explains why unions heavily support minimum wage laws even though virtually no union workers earn anything near to the minimum wage.

(5) "Keeping the Poor Poor: The Dark Side of the Living Wage." Oct 21st, 2003. Cato Policy Analysis. By Carl F. Horowitz. Pg. 3. http://www.cato.org/pubs/pas/pa493.pdf

(6) Testimony of Paul Kersey, Bradley Visiting Fellow at the Heritage Foundation, Before the House of Representatives; Small Business Committee; Subcommittee on Workforce, Empowerment, and Government Programs, Regarding The Economic Effects of the Minimum Wage. May 3, 2004. Online at: http://www.heritage.org/Research/Labor/tst042904a.cfm#_ftn5

(7) Ibid.

(8)"A minimum wage hike wouldn't add up," Paul Kersey, July 22, 2004, the Heritage Foundation. Found online at: http://www.heritage.org/Press/Commentary/ed072204b.cfm

(9) "Keeping the Poor Poor: The Dark Side of the Living Wage." Oct 21st, 2003. Cato Policy Analysis. By Carl F. Horowitz. Pg. 5.

(10) "Wage Growth Among Minimum Wage Workers" by William E. Even, Miami University of Ohio and David A. Macpherson, Florida State University. The Employment Policies Institute. June 2004. Available online at: http://www.epionline.org/studies/macpherson_06-2004.pdf

(11) James 2:15-16, New American Standard Version