More Equality in the U.S. Than in Europe: When the Minimum Wage Buys More in the U.S.

Great post by Hans Bader of CEI.

"France and England may have higher minimum wages than most of the U.S. does, but things cost so much there that minimum-wage workers can afford less stuff than a U.S. minimum wage worker can (due partly to consumption taxes like the VAT that finance the European welfare state). One example is provided at the liberal-leaning blog The Daily Dish: beer. A minimum wage worker can buy a beer with 0.4 hours of labor in the U.S., compared to 0.5 hours in the United Kingdom, and 0.6 hours in France. It’s a graph of “How many hours of minimum wage work it takes to buy a beer” in countries across the world. The graph actually understates the advantage enjoyed by the American minimum wage worker, since it uses the U.S. federal minimum wage, which is lower than the state minimum wage in many states.

The things working-class people buy are cheaper in the U.S. than in Europe. That is especially true for electricity, heating, and clothing, which are much more expensive in Europe. To a lesser extent, it is also true for things like fast food. When I visit my French relatives, I pay a lot more for a hamburger than I do in the U.S., although the gap is less now that McDonald’s has curtailed its (U.S.) dollar value menu, a discount option that never existed in France. Until late 2013, an American could buy a double cheeseburger with as much meat as a Big Mac for $1.29, or even as little as a dollar, in U.S. McDonald’s franchises. No such deep-discount option existed in France, and Big Macs are more expensive in France and most of Europe than in the U.S. In January 2012, a Big Mac cost $9.63 in Norway, $8.14 in Finland, $7.29 in Sweden, and $6.81 in Switzerland, much more than in the U.S.

Living standards are already far more equal in the U.S. than in most European countries. Most Americans below the poverty line live better than the average Western European, and possess things — like air conditioners, cable TV, and dryers — that many Europeans lack. Moreover, 46 percent of Americans below the poverty line own their own homes, typically, a three-bedroom house. Poor people live much worse in Europe. My wife, who is from a working-class French family of modest means, had to share a French home no bigger than our current house with seven or more relatives, and didn’t even have a bed — just a mattress on the floor — for part of her childhood. She certainly didn’t have a room of her own. The income of different social classes may technically be closer together in many European countries than in America, but living standards are further apart in Europe, because it typically costs more in Europe for basic necessities, like housing and household appliances, than it does here.

Many Americans classified as poor by the federal government are actually not poor at all, and have a higher living standard than past generations of Americans. For example, 97 percent of “poor” households have a color TV.  Many of them own their own home, and those that do typically have a “three-bedroom house with one-and-a-half baths, a garage, and a porch or patio,” notes Clayton Cramer. Unlike other countries, the U.S. ignores many government benefits received by people in determining whether they fall below the poverty line. Food stamps, earned-income tax credits, and other forms of welfare are ignored by the government in classifying people as impoverished.

As a Robert Rector, an analyst at The Heritage Foundation, has pointed out,

Overall, the typical American defined as poor by the government has a car, air conditioning, a refrig­erator, a stove, a clothes washer and dryer, and a microwave. He has two color televisions, cable or satellite TV reception, a VCR or DVD player, and a stereo. He is able to obtain medical care. His home is in good repair and is not overcrowded. By his own report, his family is not hungry and he had suf­ficient funds in the past year to meet his family’s essential needs. While this individual’s life is not opulent, it is equally far from the popular images of dire poverty conveyed by the press, liberal activists, and politicians.

Government officials create a contrary impression through misleading PR campaigns. In the bogus “Food Stamp Challenge,” lawmakers and welfare bureaucrats pretend that it’s hard to eat on a Food Stamps budget, in order to justify more welfare spending. But I spent less on food than many food stamp recipients for years. As a young lawyer, I consistently spent less than $5 a day on food — generally less than a dollar per meal — while consuming nutritious fruits and vegetables and healthy proteins. In 2007, The Washington Post ran a story in its health section about how prosperous people, such as a chef and a natural foods store owner, were able to live quite well on a food stamps budget. For example, Rick Hindle, executive chef for the Skadden, Arps law firm, showed “that you don’t have to spend hours in the kitchen to prepare healthful food for $1 or less per meal.” You can easily spend less on food than the poorest food stamp recipients and still enjoy a healthy, low-fat diet rich in vitamins and fiber. That’s what a Quaker vegetarian found when he decided to limit his weekly spending on food to a food stamp budget, even though he ate only organic food (which costs more).

Even the mostly liberal readers of the Daily Dish blog have admitted that food stamps covered far more than the amount needed to get enough nutritious food to eat. As one noted, he spent more money on food while on food stamps than ever he did before going on food stamps:

As a family of four (me, wife, two kids) we got around $550 for food per month (~$140/person per month). This was far more than we were spending before we ended up on food stamps and more than we budget for food now that I am employed again. We bought milk, not soda, and meat, not canned food, and we had enough to build up some food storage as well. The idea that there just isn’t enough money from food stamps and people are forced into making poor food choices is flat wrong in my experience.

As another noted, “Here in good old Oregon, where one in five citizens is on food stamps, we almost have the opposite problem: people using food stamps to purchase gourmet, organic, fair-trade, eco-friendly food. I’ve seen people purchase $20/pound wild caught fresh salmon and not blink an eye.”

The U.S. already has a more progressive tax code than most European countries, and even before recent increases in investment and income taxes for the wealthy, Mitt Romney paid more in income tax than he would have had he lived in Canada rather than the U.S."