Minimum Wages: An Antiquated and Ineffective Antipoverty Tool

The Relative Effectiveness of the Minimum Wage and the Earned Income Tax Credit as Anti-Poverty Tools

“…(CBO 2014, p. 21) To the extent that any of workers received a raise, the ratio of workers better off: workers worse off would rise above the over 30:1 estimated above. 25 In this article, Sabia (Sabia 2014a(Sabia , p. 1031) defines low-wage workers as those "earning less than half of the average private sector wage ($9.87 in 2012) and working at least 15 hours per week and at least 14 weeks in the last year..." With a different definition of 'low wage', Sabia's quantitative results differ from those of the Congressional Budget Office (CBO 2014), but the qualitative results are the same. Sabia extends the work of Burkhauser and Finegan (Burkhauser and Finegan 1989), who were among the first to point out the declining proportion of low-wage workers who were in poor families.…”

Policy levers to increase jobs and increase income from work after the Great Recession

“…42 Third, other recent work suggests that Dube's conclusions are fragile. Sabia (2014) reports that with a longer sample period (1979-2012 versus 1990-2012), the types of specifications Dube advocates fail to point to significant effects of minimum wages on poverty (or extreme poverty), although from a policy perspective we may be interested in what more recent data show. Sabia also reports that Dube's specification with spatial controls delivers weaker anti-poverty results when the sample conditions on workers, whereas we should expect stronger results-perhaps suggestive of model misspecification-although he does not show that the specification without spatial controls is free of this problem.…”

Do minimum wages stimulate productivity and growth?

“…A large number of recent studies explore the effects of minimum wage increases on poverty, the vast majority of which find little evidence that the minimum wage is an effective antipoverty tool [8]. An emerging literature also finds little evidence that minimum wages are effective at reducing consumption-based deprivation, or material hardship [9].…”

“…Studies focusing on these workers find that those in poor families who do not lose their jobs, or have their hours substantially reduced, see their earnings rise and their households lifted out of poverty. However, other near-poor workers experience minimum wage-induced job loss or hours reductions, causing earnings losses and increased poverty [8]. And if adverse employment effects are larger during recessions, minimum wage increases may have particularly adverse distributional consequences during economic downturns.…”

“…Thanks are also due to Thanh Tam Nguyen, Taylor Mackay, and Usamah Wasif for excellent research assistance. Previous work of the author contains a larger number of background references for the material presented here and has been used intensively in major parts of the article [1], [3], [8], [9]. Grant support from the Employment Policies Institute is gratefully acknowledged for previous work upon which this article is based.…”