Sen. Kerry’s Minimum Wage Hike Is Inefficient Way To Help Working Poor

  • Publication Date: July 2004

  • Topics: Minimum Wage

As presidential hopeful John Kerry and Senator Ted Kennedy push to increase the minimum wage to $7.00 an hour, a new study conducted by Cornell University economics professor Richard Burkhauser and Dr. Joseph Sabia find that a 36 percent increase in the wage floor will only serve to decrease employment opportunities for entry-level employees—particularly the low-skill employees minimum wage hikes are intended to help—without providing the majority of its benefits to poor families. The new report was commissioned by the Employment Policies Institute (EPI).

Contrary to the claims of Senators Kerry and Kennedy, “the majority of the working poor are not helped by a minimum wage hike and the vast majority of those who benefit do not live in poor families,” said Burkhauser, a Sarah Gibson Blanding Professor of Policy Analysis and Chairman of the Department of Policy Analysis and Management.

The EPI study reveals that the majority of beneficiaries from a minimum wage hike do not live in poverty nor are they the primary earner in their family. In fact, according to U.S. government data, employees earning the minimum wage are more likely to live in families earning three times the poverty line than in poor families. Only 15 percent of the benefits from a wage increase to $7.00-an-hour would go to families in poverty, while 60 percent of the benefits would go to families earning twice the poverty line or more. Only 12.6 percent of beneficiaries from the proposed increase are unmarried women with children, while over 82 percent are either not the highest earner in their family, single adults, or are married without children.

The authors also found that the vast majority of families who are living in poverty will not benefit from the proposed increase and will in fact face an increased chance of job loss to higher skilled workers that are attracted to the higher wage. Hardest hit from this unintended consequence will be the nation’s least-skilled employees. A 10 percent increase in the minimum wage causes four times more employment loss for employees without a high school diploma and African American young adults than it does for more educated and non-black employees.

“Because of the poor targeting and the job loss experienced by the nation’s least skilled workers, minimum wage hikes are an inefficient way to combat poverty,” said Craig Garthwaite, director of research for the Employment Policies Institute.