Inside of Target store
Jakob Puckett

Activists have spent years trying to persuade lawmakers to raise the minimum wage to $15. In a possible effort to get ahead of the curve, the retail giant Target decided to voluntarily raise its minimum wage to $15 an hour. Who could object to that?

It turns out, Target workers themselves.

After Target raised its employees’ wages, Target then proceeded to cut their hours. A CNN story highlighted the workers’ frustration.

“I got that dollar raise but I’m getting $200 less in my paycheck. I have no idea how I’m going to pay for rent or buy food,” one worker commented.

Workers didn’t just lose hours—some lost benefits. Target employees must average 30 hours per week to qualify for health insurance benefits. But the reduction in hours worked pushed some employees below 30 hours, costing them health care benefits. The negative impact of such a policy was predictable.

The vast majority of people earning the minimum wage are not trying to live solely on that wage. The typical minimum wage worker is someone who is under 25, still in college, working part time, and living in a family well above poverty. According to a 2017 Government Accountability Office report, only 13 percent of households with someone earning between $7.25 and $12 per hour were in poverty.

Raising the minimum wage benefits some lucky teenagers at the expense of the working poor. Show-Me Institute analysts have discussed this problem many times before, most recently regarding Missouri’s decision to raise the state’s minimum wage to $12 per hour by 2023.

Perhaps Target’s situation will help people see that the negative consequences of minimum wage increases are more than theoretical. Policies targeted specifically at the desired recipients, like the earned-income tax credit, are more effective at incentivizing hard work than a one-size-fits-all policy.

If we want to help the working poor, raising the minimum wage is simply not the way to do it.

 

About the Author

Jakob Puckett
Jakob Puckett
Analyst

Jakob Puckett received his M.S. in Economics from University of Illinois in 2019.