Minimum Wage Hike: An Empty Promise for Low-Income Families

Sixty years of research shows minimum wage hikes put low-skilled adults out of work and have no impact on poverty
  • Publication Date: January 2007

  • Topics: Minimum Wage

Washington, DC – The Employment Policies Institute warns today that legislation to raise the federal minimum wage to $7.25 would put low-skilled Americans out of work and ultimately prove ineffective at fighting poverty.

Minimum wage hikes jeopardize entry-level jobs:
Separate studies from economists at Duke, Michigan State, and Boston University all conclude that minimum wage hikes attract teenagers from wealthy families into the workforce, displacing low-skilled adults in the process.

Economists at Cornell University and the University of Connecticut found that a 10% increase in the minimum wage results in an 8.5% increase in unemployment for young African Americans and adults lacking a high school diploma.

Minimum wage hikes don’t target low-income families:
Not only would a minimum wage hike jeopardize the jobs of low-skilled adults, but it is a grossly ineffective way to assist low-income families for the simple reason that most minimum wage earners come from families that aren’t poor. In fact, the average family income of those who would benefit from the hike is $45,500 a year.

Recent research from economists at Cornell and the University of Georgia found that only 3.7% of the benefits from the proposed hike to $7.25 would go to poor single mothers, and only 3.8% of the benefits would go to poor African American families. In contrast, over 87% of the benefits would go to families that aren’t poor.

There is a better way to help low-income families:
Instead of raising the minimum wage, Congress can have a real impact on the lives of low-income Americans by supporting an expansion of the Earned Income Tax Credit [EITC]. Unlike minimum wage hikes, the EITC effectively targets benefits to those in need without jeopardizing jobs.

“Raising the minimum wage is a feel-good policy that does little good,” said Mike Flynn, EPI’s Director of Legislative Affairs. “If this were about having a real impact on the lives of low-income families—instead of politics and popularity— lawmakers should be promoting an increase in the Earned Income Tax Credit, which has proven to be the best anti-poverty tool we have.”

The Employment Policies Institute is a nonprofit research organization dedicated to studying public policy issues surrounding entry-level employment. For more information or to schedule an interview, please contact Alison at 202/463-7650.