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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
    DOI: 10.4284/sej.2010.76.3.592
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    Citations

    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

    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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