Tag: Minimum Wage

A Bogus Study Says You Can’t Afford Rent on Minimum Wage in Any State

Authored by: Matt Palumbo

A new study is out that, if taken at face value, would imply that many of those reading this should be homeless.

Every year the National Low Income Housing Coalition (NLIHC), a think tank devoted to preserving federal housing assistance and expanding the supply of low income housing, releases a study on the affordability of housing in America. The media always eats it up, usually running a story with some variant of the headline “Study Finds That In No State Can a Minimum Wage Worker Afford a Two-Bedroom Apartment.” Some of the more shameless publications report it as “apartment” instead of “two-bedroom apartment.”

Below is a table from the study claiming to show the hourly wage needed to afford a two-bedroom in various U.S. States. In many States that wage is higher than the median wage in that State:

While they don’t mention the minimum wage as a policy issue on their website, it’s the “Fight for Fifteen” types that have latched onto NLIHC’s research. For example, below is a video released by Sen. Bernie Sanders office, in which the study is summarized:

Oh, where to begin?

To start with the obvious, we’re left to parse why a single minimum wage worker would purchase a two-bedroom apartment. It feels almost condescending to point out that right off the bat, every single estimate here could be cut in half with the addition of something known as a “room mate.”

And as obvious as that error is, it’s not even the biggest flaw in the study. The study itself it’s not measuring rent, it’s measuring fair market rent. When you hear the headline “minimum wage workers can’t afford a two-bedroom apartment in any State,” it gives the impression that’s because a two-bedroom costs more than a minimum wage worker can expect to earn in a month. Read the fine print, and that’s not what the study is saying.

“Fair market rent” is rent that consumes less than 30% of a renters income. In other words, what the study is saying that in no State can you afford a two-bedroom apartment as a single individual, and still have 70 percent of your income left over afterwards. So a minimum wage worker earning $1,160 a month could pay $500 a month in rent, and it would still be considered “unaffordable” because they’re not earning $1,666. While no one is denying that life is difficult on minimum wage, it wouldn’t be the end of the world if someone spent 31 percent of their income on rent. And as mentioned earlier, the wages that the NLIHC claims a worker would need to afford a two bedroom apartment in many States exceeds the median wage in many of those States, and it goes without saying that half of the population is not homeless in those States.

To further illustrate how much of a pointless exercise this study is, it doesn’t acknowledge that someone that’s earning minimum wage and fits the “working poor” description would be receiving the majority of their income as non-cash income in the form of various government benefits. That’s how it’s possible for the average poor person to spend $2.30 for every dollar of earned income they have, according to the Heritage Foundation.

It’s also a bit off that the NLIHC, which exists to preserve federal housing assistance, didn’t account for the fact that a minimum wage worker that’s renting would qualify for that assistance. It seems like they rigged the study to produce whatever conclusion the authors wanted, doesn’t it?

On that note, I guess we’ll have to just stay tuned till next year, when this bogus study is updated, and makes its way unquestioned throughout every major media outlet.

 

PROOF Raising the Minimum Wage Can’t Reduce Poverty

Authored by: Matt Palumbo

Socialist Senator Bernie Sanders repeated a quip a number of times in defense of a $15 an hour minimum wage on the campaign trail back in 2015 and 2016; that “nobody who works 40 hours a week should be living in poverty.”

It’s not even a particularly left-wing statement, and people of all ideological stripes can probably resonate with it a bit. After all, we’re against moochers, but someone that’s poor despite working 40 hours a week can hardly be considered a moocher.

So here’s the problem with turning Bernie’s statement into an argument for hiking the minimum wage; poverty is not a wage problem, it’s a work problem. After all, the poverty threshold is low enough where someone working 40 hours a week, 50 weeks a year to be above it (as they’d earn $14,500).

So how would one find themselves in poverty? Having a child, and thus an extra person in the household (who obviously isn’t generating income, but consuming it) is one obvious answer. But there’s an even bigger reason why – not actually working full time.

In 2015, only 11 percent of (working age) people in poverty worked full time. By contrast, 63 percent of those in poverty don’t work at all. Of full time workers in America, only 2 percent live in poverty (compared to 32 percent of the unemployed). If we look at those with families, the numbers become even more stark. For instance, in 2011 only 0.3 percent of families in poverty worked an hourly job earning the minimum wage.

The minimum wage can’t help people who don’t work – and every conservative and their mother is aware that hikes in the minimum wage increase unemployment among the most vulnerable, but those aren’t the only consequences. Minimum wage hikes also reduce hours worked, and decrease the labor force participation rate.

A study published in 2001 at North Carolina State University by Dr. Walter J. Wessels looked at past minimum wage hikes, finding that hikes from 1978-1981, finding that they reduced teen labor force participation by 3.62 percentage points, 1990-91 hikes by 2.07 percentage points, and 1996-97 hikes by 1.31 percentage points. I’m using the youth as a proxy for the low-skilled, and you can see the effects for yourself graphically:

And in the case of reduced hours, that can offset the benefits of a minimum wage hike entirely. Take Seattle as an example, which was one of the first cities to pass a $15 an hour minimum wage ordinance in 2014 (that took full effect on January 1, 2018).

That’s the exact wage Bernie would like to see to lift all our full time workers out of poverty, but a study conducted by the University of Washington found that the law reduced hours by 9 percent, which caused wages to fall on net by 6 percent. And the kicker? That study was conducted when Seattle’s minimum wage had “only” risen from $10.50 to $13 an hour, as the $15 wage was phased in gradually. And despite that $2.5 an hour raise at the time of the study, workers were still $125 a month worse off.

And that’s for the people who kept their jobs. Things were much worse off for the 5,000 workers who lost their jobs entirely.

In response, Seattle’s legislature, which commissioned the study, promptly fired all the University of Washington researchers for making the mistake of stumbling upon the truth.

Liberals treat poverty as a wage problem, when it’s a work problem. And the best way to get people working is to ensure that they’re not priced out of a job.

 

August 21, 2017: Ep. 529 Popping the Media Bubble

The far-Left’s entire political strategy is premised on making you believe that their fringe positions are held by a majority of Americans. Hint; they’re wrong.

The D.C./Media Bubble is reading Trump all wrong. Again!

I’ll debunk the premise of this study showing the economic performance of Democrat and Republican presidents.

Democrats are celebrating a minimum wage study showing it will cause tens of thousands of job losses?

Is the Secret Service bankrupt?

August 7, 2017: Ep. 519 The Huffington Post Viciously Attacks Conservatives

Did you see this vicious attack on conservatives in the Huffington Post? I debunk this nonsensical piece using facts, which are anathema to the Left.

The European social welfare state’s taxation model is collapsing, here’s the data.

The far-Left NYC Mayor wants to tax the rich, again!

The NY Times is floating a ridiculous Mike Pence story that requires attention.

June 27, 2017: Ep. 490 The Fake News Scandal Explodes

In this episode I address an explosive hidden camera recording of a CNN producer acknowledging that there’s no proof of the Trump-Russia connection and that they’re covering it for “ratings.”
I also cover a powerful new study addressing the damaging economic effects of minimum wage on low income employees. This is another example of liberal policies hurting those that they purport to “help.”
Finally, I address the CBO’s GOP Obamacare replacement report and the problems with their analysis, along with the Trump travel ban victory at the Supreme Court.