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

Author

Listed:
  • 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.

Suggested Citation

  • 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, Southern Economic Association, vol. 76(3), pages 592-623, January.
  • Handle: RePEc:sej:ancoec:v:76:3:y:2010:p:592-623
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    File URL: http://dx.doi.org/10.4284/sej.2010.76.3.592
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    References listed on IDEAS

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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 19:27:53
    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 18:59:38
    3. Minimum wage - poorly targeted
      by Crampton in Offsetting Behaviour on 2010-02-01 07:57:00
    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 16:29:00

    Citations

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    Cited by:

    1. Raissian, Kerri M. & Bullinger, Lindsey Rose, 2017. "Money matters: Does the minimum wage affect child maltreatment rates?," Children and Youth Services Review, Elsevier, vol. 72(C), pages 60-70.
    2. Michael R. Strain & Peter Brummund, 2016. "Real and permanent minimum wages," AEI Economics Working Papers 875967, American Enterprise Institute.
    3. repec:bla:ecinqu:v:55:y:2017:i:4:p:1986-2007 is not listed on IDEAS
    4. Fields, Gary S., 2013. "Aid, Growth, and Jobs," IZA Discussion Papers 7141, Institute for the Study of Labor (IZA).
    5. vom Berge, Philipp & Frings, Hanna & Paloyo, Alfredo R., 2013. "High-Impact Minimum Wages and Heterogeneous Regions," Ruhr Economic Papers 408, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    6. Fields, Gary S., 2012. "Aid, Growth, and Jobs," WIDER Working Paper Series 086, World Institute for Development Economic Research (UNU-WIDER).
    7. Dube, Arindrajit, 2017. "Minimum Wages and the Distribution of Family Incomes," IZA Discussion Papers 10572, Institute for the Study of Labor (IZA).
    8. Brady P. Horn & Johanna Catherine Maclean & Michael R. Strain, 2017. "Do Minimum Wage Increases Influence Worker Health?," Economic Inquiry, Western Economic Association International, vol. 55(4), pages 1986-2007, October.
    9. Jeffrey Clemens, 2016. "Redistribution through Minimum Wage Regulation: An Analysis of Program Linkages and Budgetary Spillovers," Tax Policy and the Economy, University of Chicago Press, vol. 30(1), pages 163-189.
    10. 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.
    11. David Neumark, 2014. "Employment effects of minimum wages," IZA World of Labor, Institute for the Study of Labor (IZA), pages 1-6, May.
    12. 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).
    13. 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.
    14. Arpaia, Alfonso & Cardoso, Pedro & Kiss, Aron & Van Herck, Kristine & Vandeplas, Anneleen, 2017. "Statutory Minimum Wages in the EU: Institutional Settings and Macroeconomic Implications," IZA Policy Papers 124, Institute for the Study of Labor (IZA).
    15. Sergey Kapelyuk, 2015. "The effect of minimum wage on poverty," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 23(2), pages 389-423, April.
    16. Garnero, Andrea, 2017. "The Dog That Barks Doesn't Bite: Coverage and Compliance of Sectoral Minimum Wages in Italy," IZA Discussion Papers 10511, Institute for the Study of Labor (IZA).
    17. repec:unu:wpaper:wp2012-86 is not listed on IDEAS
    18. 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.

    More about this item

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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