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Why Minimum Wage Increases Are a Poor Way to Help the Working Poor

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  • Burkhauser, Richard V.

    (University of Texas at Austin)

Abstract

Minimum wage increases are not a very effective mechanism for reducing poverty. They are not related to decreases in poverty rates. They can cost some low-income workers their jobs. And most minimum wage earners who gain from a higher minimum wage do not live in poor (or near-poor) families. A better tool for reducing poverty, and at lower cost, is the earned income tax credit. It is a much more targeted way to provide income to workers in poor families. It raises the wages of only workers in low-income families and rises with the number of dependent children in a family.

Suggested Citation

  • Burkhauser, Richard V., 2014. "Why Minimum Wage Increases Are a Poor Way to Help the Working Poor," IZA Policy Papers 86, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izapps:pp86
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    References listed on IDEAS

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    1. Joseph J. Sabia & Richard V. Burkhauser, 2010. "Minimum Wages and Poverty: Will a $9.50 Federal Minimum Wage Really Help the Working Poor?," Southern Economic Journal, John Wiley & Sons, vol. 76(3), pages 592-623, January.
    2. Congressional Budget Office, 2014. "The Effects of a Minimum-Wage Increase on Employment and Family Income," Reports 44995, Congressional Budget Office.
    3. Congressional Budget Office, 2014. "The Effects of a Minimum-Wage Increase on Employment and Family Income," Reports 44995, Congressional Budget Office.
    4. Arindrajit Dube & T. William Lester & Michael Reich, 2010. "Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties," The Review of Economics and Statistics, MIT Press, vol. 92(4), pages 945-964, November.
    5. Neumark, David & Salas, J.M. Ian & Wascher, William, 2013. "Revisiting the Minimum Wage-Employment Debate: Throwing Out the Baby with the Bathwater?," IZA Discussion Papers 7166, Institute of Labor Economics (IZA).
    6. Congressional Budget Office, 2014. "The Effects of a Minimum-Wage Increase on Employment and Family Income," Reports 44995, Congressional Budget Office.
    7. Congressional Budget Office, 2014. "The Effects of a Minimum-Wage Increase on Employment and Family Income," Reports 44995, Congressional Budget Office.
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    Cited by:

    1. Richter Wolfram F., 2014. "Der flächendeckende Mindestlohn – Anmerkungen zu dem gleichnamigen Beitrag von Andreas Knabe, Ronnie Schöb und Marcel Thum," Perspektiven der Wirtschaftspolitik, De Gruyter, vol. 15(4), pages 324-330, December.
    2. Hazans, Mihails & Pluta, Anna, 2017. "An in-depth analysis of the impact of reforms on inequality – Latvia," MPRA Paper 118598, University Library of Munich, Germany.
    3. Grishina, E. & Kuznetsova, P., 2018. "Minimum Wage as a Tool to Reduce Poverty: Expected Consequences of the Reform," Journal of the New Economic Association, New Economic Association, vol. 40(4), pages 137-156.
    4. Joseph J. Sabia, 2015. "Do minimum wages stimulate productivity and growth?," IZA World of Labor, Institute of Labor Economics (IZA), pages 221-221, December.
    5. Richard V. Burkhauser & Drew McNichols & Joseph J. Sabia, 2023. "Minimum Wages and Poverty: New Evidence from Dynamic Difference-in-Differences Estimates," NBER Working Papers 31182, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    minimum wage; earned income tax credit; working poor;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets

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