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Price hikes hurt the poor, middle class

by The Oklahoman Editorial Board Published: April 15, 2014

COMBINING their “income inequality” obsession with business bashing, some liberals are blaming supposed corporate greed for the financial challenges of the poor. Such theories are only plausible in the abstract. Under scrutiny, they fall apart.

A recent video produced by Slate, a liberal website, argues that Walmart could raise wages and ultimately save taxpayer money because fewer of its workers would qualify for food stamps. Currently, Slate says, cashiers are paid an average wage of $8.81 per hour. To raise that sum to $13.63, Slate argues, Walmart could raise prices 1.4 percent. A 68-cent box of macaroni and cheese would instead cost 69 cents. Slate claims this would keep many Walmart employees off food stamps.

This sounds like a win-win. But Robert VerBruggen, editor of RealClearPolicy, notes the plan has some major flaws. For one thing, it requires some poor people to pay more for goods so other equally poor people can get a raise. This isn’t Robin Hood robbing the rich to give to the poor. It’s robbing the poor to give to the poor.

Research from the University of California at Berkeley has concluded that if Walmart raised prices to fund a higher minimum wage, 28.1 percent of the price increase would be borne by consumers in families with incomes below 200 percent of the federal poverty level. Many other Walmart customers facing higher prices are thoroughly middle-income families who aren’t exactly rolling in dough.

“Transferring $100 from Walmart customers to the lowest-paid Walmart employees is like taking $28 from some poor people and giving it to other poor people, taking $59 from some nonpoor people and giving it to other nonpoor people, and taking $13 from nonpoor people and giving it to poor people,” VerBruggen writes.

Even if that doesn’t bother you, the plan has other problems. For one thing, about half of that cashier’s raise would be immediately lost thanks to the perverse incentives of welfare.

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by The Oklahoman Editorial Board
The Oklahoman Editorial Board consists of Gary Pierson, President and CEO of The Oklahoma Publishing Company; Christopher P. Reen, president and publisher of The Oklahoman; Kelly Dyer Fry, editor and vice president of news; Christy Gaylord...
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