Minimum Wage Hike Would Likely Worsen Poverty

  • Publication Date: August 2004

  • Topics: Minimum Wage

Washington – Candidates and lawmakers that are flirting with the idea of raising the minimum wage in response to negative poverty data recently released by the U.S. Census Bureau must realize that such a move will increase poverty, the Employment Policies Institute (EPI) said today. Using poverty statistics to justify an increase in the minimum wage is simply an election year ploy that ignores the economic evidence on the minimum wage, which shows the job destroying effects of the minimum wage actually makes poverty worse.

Recent research by economists Drs. Richard Burkhauser and Joseph Sabia of Cornell University found that the majority of beneficiaries from Senator Kerry’s proposed minimum wage increase to $7.00-an-hour are not living in poverty. In reality, beneficiaries are more likely to be living in families earning three times the poverty line than in poor families.

Even more troubling, the majority (70%) of the working poor will receive no benefit from the proposed increase because they already earn more than $7.00-an-hour. The reason they are in poverty has little to do with their wage level and more to do with the number of hours worked and their family size, something a minimum wage increase would make worse.

EPI noted that due to these facts, economic research shows that mandated wage hikes actually increase poverty and further noted that such increases only decrease job opportunities for the nation’s impoverished and least-skilled—leading to higher poverty rates.

Dr. David Neumark of the Public Policy Institute of California concluded that there was no statistical measure of a decline in poverty when the minimum wage is increased saying, “on net, poverty seems to rise [as a result of a minimum wage increase] – likely because the job losses associated with a higher minimum wage fall disproportionately on poor families…”

“The latest poverty figures should stop any candidate or policymaker from considering an increase in the minimum wage this election season,” said EPI research director Craig Garthwaite. “It is a poorly targeted economic policy that will decrease job opportunities for the least skilled and push more families into poverty.”

The Employment Policies Institute is a nonprofit research organization dedicated to studying public policy issues surrounding entry-level employment. For additional information or to schedule an interview with a spokesperson call Mike Burita at 202.463.7650.