In which We Are Reminded that Raising the Minimum Wage Can Do More Harm than Good

Money

Team Obama and the Democratic party like to cite Warren Buffett as an authority for the proposition that taxes have to be raised in order to address inequality in society; never mind the fact that the so-called “Buffett Rule” for taxes would work out rather well for Warren Buffett. I wonder what they will have to say when it comes to addressing Buffett’s view regarding the minimum wage:

Billionaire Warren Buffett said the level of income inequality in the U.S. is “extraordinary” but that raising the minimum wage isn’t the best solution.

“I don’t have anything against raising the minimum wage but I don’t think you can do it in a significant enough way without creating a lot of distortions,” Buffett, 84, Berkshire Hathaway Inc.’s chief executive officer, said Saturday at the company’s annual shareholders meeting in Omaha, Nebraska. Those distortions “would cost a whole lot of jobs,” Buffett said.

Answering questions alongside Buffett, Charles Munger, 91, Berkshire’s vice chairman, said raising the federal minimum wage, which has been $7.25 an hour since July 2009, “would hurt the poor.”

I am glad to see that Buffett and Munger are being more reality-based than is the so-called “reality-based community,” when it comes to discussing this issue. I am also glad to see that Buffett and I are of one mind when it comes to advocating on behalf of a better policy that will do more to help out the working poor:

Buffett, the second-richest person in the U.S., said raising the minimum wage was “a form of price fixing” and instead favored reforming the earned income tax credit, a refund paid to low and moderate income individuals and couples.

[. . .]

Buffett has said repeatedly that tax refunds are better for the economy and workers than forcing companies to increase wages.

“The earned income tax credit is much clearer,” Buffett said in an interview with CNBC last year. “That puts more money in the pockets of people who are working for low wages.”.

Almost 28 million U.S. taxpayers received the EITC in the 2013 tax year, according to IRS data in December. The payments totaled more than $66 billion and the average amount nationwide was about $2,407.

Relatedly:

It may be one of the first casualties of Seattle’s new minimum wage law. The owner of Z Pizza says she’s being forced to close her doors, because she can’t afford the higher labor costs.

Devin Jeran was happy to get a raise, when Seattle’s minimum wage went up to $11 an hour at the beginning of the month.

“I definitely recognize that having more money is important,” he says, “especially in a city as expensive as this one.”

Unfortunately, he’ll only enjoy that bigger paycheck for a few more months. In August, his boss is shutting down Z Pizza and putting him and his 11 co-workers out of work.

“Fortunately she keeps us in the loop, she didn’t just tell us last minute.”

Ritu Shah Burnham doesn’t want to go out of business, but says she can’t afford the city’s mandated wage hikes.

“I’ve let one person go since April 1, I’ve cut hours since April 1, I’ve taken them myself because I don’t pay myself,” she says. “I’ve also raised my prices a little bit, there’s no other way to do it.”

The plural of “anecdote” is not “data.” But would it really surprise anyone to find out that there are more stories out there like this one?

(Photo Credit.)