Earned income tax credit a better way to help those in need

April 5, 2006

Free Market Foundation

While the intent of raising the minimum wage in Pennsylvania is to assist low-skilled employees, a mandated hike will result in a loss for the very people it is meant to help, according to the Employment Policies Institute.

Cornell University economists found that adult high school dropouts and African American young adults suffer four times more employment loss from a minimum wage hike than their more educated and non-black counterparts, respectively.

Research from Duke University found that these low-skilled employees lose their jobs to more skilled applicants — often teenagers from wealthy families who did not even search for a job at the previous minimum wage.

Wage increases also fail to meet their stated goals for the simple fact that minimum wage earners aren’t poor. Researchers from Florida State University found that only 10 per cent of minimum wage earners in Pennsylvania are the sole earner of a family with kids and nearly half (45.9 per cent) still live with their parents.

Knowing this, it is little surprise that 80 per cent of the benefits of a wage hike go to families that aren’t poor. Pennsylvania lawmakers have an opportunity to effect real change for low-skilled employees during a special hearing this month by considering a state earned income tax credit. An EITC could give the Commonwealth’s most needy full-time working families an effective wage increase to well over $7.20 an hour without jeopardising their jobs, says the Institute.

Source: Press Release, Raising Pennsylvania’s Minimum Wage Will Result in Job Loss for Low-Skilled, Employment Policies Institute, March 8, 2006.

For text: http://www.epionline.org/news_detail.cfm?rid=59#

For more on Economy: http://www.ncpa.org/iss/eco/

FMF Policy Bulletin 04 April 2006