Why then are they called "poor"? Because government bureaucrats
create the official definition of poverty, and they do so in ways that
provide a political rationale for the welfare state -- and, not
incidentally, for the bureaucrats' own jobs.
Most people in the lower income brackets are not an enduring
class. Most working people in the bottom 20 percent in income at a given
time do not stay there over time. More of them end up in the top 20
percent than remain behind in the bottom 20 percent.
There is nothing mysterious about the fact that most people
start off in entry level jobs that pay much less than they will earn
after they get some work experience. But, when minimum wage levels are
set without regard to their initial productivity, young people are
disproportionately unemployed -- priced out of jobs.
In European welfare states where minimum wages, and mandated job benefits to be paid for by employers, are more generous than in the United States, unemployment rates for younger workers are often 20 percent or higher, even when there is no recession.
Unemployed young people lose not only the pay they could have earned but, at least equally important, the work experience that would enable them to earn higher rates of pay later on.
Minorities, like young people, can also be priced out of jobs. In the United States, the last year in which the black unemployment rate was lower than the white unemployment rate -- 1930 -- was also the last year when there was no federal minimum wage law. Inflation in the 1940s raised the pay of even unskilled workers above the minimum wage set in 1938. Economically, it was the same as if there were no minimum wage law by the late 1940s.
In 1948 the unemployment rate of black 16-year-old and 17-year-old males was 9.4 percent. This was a fraction of what it would become in even the most prosperous years from 1958 on, as the minimum wage was raised repeatedly to keep up with inflation.
Some "compassion" for "the poor"!