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The effects of minimum wages on the distribution of family incomes: a nonparametric analysis

Author Info

  • David Neumark
  • Mark E. Schweitzer
  • William L. Wascher

Abstract

The primary goal of a national minimum wage floor is to raise the incomes of poor families with members in the work force. We present evidence on the effects of minimum wages on family incomes from March CPS surveys. Using non-parametric estimates of the distributions of family income relative to needs in states and years with and without minimum wage increases, we examine the effects of minimum wages on this distribution, and on the distribution of the changes in income that families experience. Although minimum wages do increase the incomes of some poor families, the evidence indicates that their net effect is, if anything, to increase the proportions of families with incomes below or near the poverty line. Thus, it would appear that reductions in the proportions of families that are poor or near-poor should not be counted among the potential benefits of minimum wages.

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Paper provided by Federal Reserve Bank of Cleveland in its series Working Paper with number 0412.

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Date of creation: 2004
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Handle: RePEc:fip:fedcwp:0412
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Keywords: Minimum wage ; Poverty;

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Find related papers by JEL classification:
  • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy
  • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

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  1. repec:cup:etheor:v:8:y:1992:i:4:p:476-88 is not listed on IDEAS
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  3. Jonah B. Gelbach, 2004. "Migration, the Life Cycle, and State Benefits: How Low Is the Bottom?," Journal of Political Economy, University of Chicago Press, vol. 112(5), pages 1091-1130, October.
  4. David Card, 1992. "Using Regional Variation in Wages to Measure the Effects of the Federal Minimum Wage," NBER Working Papers 4058, National Bureau of Economic Research, Inc.
  5. David Neumark & William Wascher, 1997. "Do Minimum Wages Fight Poverty?," NBER Working Papers 6127, National Bureau of Economic Research, Inc.
  6. Brown, Charles & Gilroy, Curtis & Kohen, Andrew, 1982. "The Effect of the Minimum Wage on Employment and Unemployment," Journal of Economic Literature, American Economic Association, vol. 20(2), pages 487-528, June.
  7. John DiNardo & Nicole M. Fortin & Thomas Lemieux, 1995. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," NBER Working Papers 5093, National Bureau of Economic Research, Inc.
  8. David Card, 1992. "Using Regional Variation in Wages to Measure the Effects of the Federal Minimum Wage," Working Papers 680, Princeton University, Department of Economics, Industrial Relations Section..
  9. John T. Addison & McKinleyl Blackburn, 1999. "Minimum Wages and Poverty," ILR Review, Cornell University, ILR School, vol. 52(3), pages 393-409, April.
  10. Richard V. Burkhauser & T. Aldrich Finegan, 1989. "The minimum wage and the poor: The end of a relationship," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 8(1), pages 53-71.
  11. Edward M. Gramlich, 1976. "Impact of Minimum Wages on Other Wages, Employment, and Family Incomes," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 7(2), pages 409-462.
  12. repec:sae:ilrrev:v:49:y:1996:i:3:p:547-552 is not listed on IDEAS
  13. Jean Baldwin Grossman, 1983. "The Impact of the Minimum Wage on Other Wages," Journal of Human Resources, University of Wisconsin Press, vol. 18(3), pages 359-378.
  14. Baker, Michael & Benjamin, Dwayne & Stanger, Shuchita, 1999. "The Highs and Lows of the Minimum Wage Effect: A Time-Series Cross-Section Study of the Canadian Law," Journal of Labor Economics, University of Chicago Press, vol. 17(2), pages 318-50, April.
  15. Marron, J.S. & Schmitz, H.-P., 1992. "Simultaneous Density Estimation of Several Income Distributions," Econometric Theory, Cambridge University Press, vol. 8(04), pages 476-488, December.
  16. Freeman, Richard B, 1996. "The Minimum Wage as a Redistributive Tool," Economic Journal, Royal Economic Society, vol. 106(436), pages 639-49, May.
  17. Daniel S. Hamermesh, 1993. "Labor Demand and the Source of Adjustment Costs," NBER Working Papers 4394, National Bureau of Economic Research, Inc.
  18. repec:fth:prinin:300 is not listed on IDEAS
  19. David Neumark & William L. Wascher, 1995. "Reconciling the evidence on employment effects of minimum wages: a review of our research findings," Finance and Economics Discussion Series 95-53, Board of Governors of the Federal Reserve System (U.S.).
  20. David Neumark & William Wascher, 1992. "Employment Effects of Minimum and Subminimum Wages: Panel Data on State Minimum Wage Laws," ILR Review, Cornell University, ILR School, vol. 46(1), pages 55-81, October.
  21. Johnson, William R & Browning, Edgar K, 1983. "The Distributional and Efficiency Effects of Increasing the Minimum Wage: A Simulation," American Economic Review, American Economic Association, vol. 73(1), pages 204-11, March.
  22. Hashimoto, Masanori, 1982. "Minimum Wage Effects on Training on the Job," American Economic Review, American Economic Association, vol. 72(5), pages 1070-87, December.
  23. David Neumark & William Wascher, 1995. "The Effects of Minimum Wages on Teenage Employment and Enrollment: Evidence from Matched CPS Surveys," NBER Working Papers 5092, National Bureau of Economic Research, Inc.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Raising the Minimum Wage: A Tired, Bad Proposal
    by Veronique de Rugy in The Corner on 2013-02-13 21:01:00
  2. Wonkblog: Economists agree: Raising the minimum wage reduces poverty
    by Mike Konczal in Ezra Klein's Wonkblog on 2014-01-04 14:00:43
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