My Turn: How would we pay for this poverty-reduction plan?
State Reps. Jan Schmidt, Rebecca Emerson Brown and Sally Kelly support raising the minimum wage from the federal minimum of $7.25 to $9, an increase of 24 percent (“Let’s give state’s hardest workers a raise,” Sunday Monitor Forum, Feb. 16). Michael Saltsman proposes adding a state supplement to the federal Earned Income Tax Credit (“There are better options than raising the minimum wage,” Sunday Monitor Forum, Feb. 16). If Saltsman is correct that 60 percent of individuals in poverty do not have a job, neither of these proposals will help them. Additional job creation and income supplement programs will be needed.
The challenge for both approaches is that they must be paid for. Saltsman favors increasing the EITC because it is targeted at people who are poor and avoids spending scarce resources on young workers who are largely supported by their parents or on individuals with a spouse earning an above-poverty wage. He is also opposed to increasing the minimum wage because the burden for paying for it will be placed on employers of minimum-wage workers. He agrees with those economists who argue that increasing the minimum wage will force employers to lay off workers or raise prices.
Since fewer workers would benefit from an increase in the EITC than would benefit from increasing the minimum wage, the overall cost should be less. It should save both employers and consumers money. Increasing the EITC, however, will still require additional money. Since, according to Saltsman, both employers and consumers would benefit from a lower minimum wage, these groups should perhaps pay the cost of the state’s ETIC by an added payroll tax on minimum-wage salaries (at a fraction of the cost of a 24 percent minimum wage increase) and/or a sales tax on goods and services produced by minimum-wage workers. After all, the traditional way of cutting back on other social services would be counterproductive for those in poverty by giving with one hand and taking away with the other. A general income or sales tax would, of course, be a non-starter in New Hampshire.
(Lars Rydell lives in Meredith.)