Saint Louis Minimum Wage Increase Put on Hold
For those who have seen the James Bond movie Goldfinger, remember when James Bond stops the atom bomb from destroying Fort Knox with 007 seconds left on the timer? That scene was pretty high-tension. The scene in Saint Louis yesterday was not as tense as that, but if the recently passed minimum wage ordinance had taken effect, the result for many businesses (and their workers) would still be pretty bad. Thankfully, the Saint Louis Circuit Court struck down the ordinance only a few hours before it was set to take effect.
You can read the Court’s decision here. Basically, the Court ruled that the ordinance conflicted with existing state law and thus was invalid.
Mayor Slay has promised to appeal to ruling, but assuming this ruling stands, we are left with the question of how best to help those working families who are struggling to get by on the current minimum wage.
Increasing the minimum wage, either at the local, state, or federal level, is not the way to go. Instead, the state and/or federal government should look to expand the Earned Income Tax Credit (EITC). Economists across the ideological spectrum agree that the EITC is a program that is better targeted to helping the working poor.
The EITC is a better policy than increasing the minimum wage for at least two reasons. First, it is specially targeted toward low-income households. If the minimum wage goes up, a teenager from an upper-middle class family working a minimum-wage job would get the same benefit as a single mother of two. The EITC goes only to members of low-income families who are working. Second, unlike an increase to the minimum wage, the EITC does not increase labor costs for business owners. Thus, an expansion of the EITC would not cause businesses to reduce hours or lay people off.
A lot of people might be upset by the Circuit Court’s ruling yesterday. However, this ruling provides policymakers with an opportunity to enact policies that can better help those who need it. The EITC is one such policy.