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Minimum Wages and Poverty: Will a $9.50 Federal Minimum Wage Really Help the Working Poor?

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  • Joseph J. Sabia

    ()
    (American University, Department of Public Administration & Policy, School of Public Affairs, 4400 Massachusetts Avenue, NW, 336 Ward Circle Building, Washington, DC 20016, USA)

  • Richard V. Burkhauser

    ()
    (Cornell University, Department of Policy Analysis & Management, College of Human Ecology, 125 MVR Hall, Ithaca, NY 14853-4401, USA)

Abstract

Using data drawn from the March Current Population Survey, we find that state and federal minimum wage increases between 2003 and 2007 had no effect on state poverty rates. When we then simulate the effects of a proposed federal minimum wage increase from $7.25 to $9.50 per hour, we find that such an increase will be even more poorly targeted to the working poor than was the last federal increase from $5.15 to $7.25 per hour. Assuming no negative employment effects, only 11.3% of workers who will gain live in poor households, compared to 15.8% from the last increase. When we allow for negative employment effects, we find that the working poor face a disproportionate share of the job losses. Our results suggest that raising the federal minimum wage continues to be an inadequate way to help the working poor.

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Bibliographic Info

Article provided by Southern Economic Association in its journal Southern Economic Journal.

Volume (Year): 76 (2010)
Issue (Month): 3 (January)
Pages: 592-623

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Handle: RePEc:sej:ancoec:v:76:3:y:2010:p:592-623

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. More evidence on minimum wages, employment and poverty
    by Stephen Gordon in Worthwhile Canadian Initiative on 2010-11-10 13:27:53
  2. Even more on the ineffectiveness of minimum wages as an anti-poverty measure
    by Stephen Gordon in Worthwhile Canadian Initiative on 2010-02-22 12:59:38
  3. Minimum wage - poorly targeted
    by Crampton in Offsetting Behaviour on 2010-02-01 01:57:00
  4. "Minimum Wages and Poverty: Will a $9.50 Federal Minimum Wage Really Help the Working Poor?"
    by Craig Newmark in newmark's door on 2010-02-22 10:29:00
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Cited by:
  1. Fields, Gary, 2012. "Aid, Growth, and Jobs," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  2. Philipp vom Berge & Hanna Frings & Alfredo R. Paloyo, 2013. "High-Impact Minimum Wages and Heterogeneous Regions," Ruhr Economic Papers 0408, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  3. Burkhauser, Richard V., 2014. "Why Minimum Wage Increases Are a Poor Way to Help the Working Poor," IZA Policy Papers 86, Institute for the Study of Labor (IZA).
  4. Michele Campolieti & Morley Gunderson & Byron Lee, 2012. "The (Non) Impact of Minimum Wages on Poverty: Regression and Simulation Evidence for Canada," Journal of Labor Research, Springer, vol. 33(3), pages 287-302, September.
  5. Nicole Coomer & Walter Wessels, 2013. "The Effect of the Minimum Wage on Covered Teenage Employment," Journal of Labor Research, Springer, vol. 34(3), pages 253-280, September.
  6. Fields, Gary S., 2013. "Aid, Growth, and Jobs," IZA Discussion Papers 7141, Institute for the Study of Labor (IZA).
  7. Kapelyuk Sergey, 2014. "Impact of minimum wage on income distribution and poverty in Russia," EERC Working Paper Series 14/03e, EERC Research Network, Russia and CIS.

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