Minimum Wage Still Hurts the Poor More Than It Helps

In the January 2010 issue of the Southern Economics Journal (Vol. 76, no. 3), Joseph Sabia (American University) and Richard Burkhauser (Cornell University) find that the effects of raising the minimum wage to $9.50 an hour hurt the poor more than it helps once negative unemployment feedback is considered. Here’s their abstract:

Using data drawn from the March Current Population Survey, we find that state and federal minimum wage increases between 2003 and 2007 had no effect on state poverty rates. When we then simulate the effects of a proposed federal minimum wage increase from $7.25 to $9.50 per hour, we find that such an increase will be even more poorly targeted to the working poor than was the last federal increase from $5.15 to $7.25 per hour. Assuming no negative employment effects, only 11.3% of workers who will gain live in poor households, compared to 15.8% from the last increase. When we allow for negative employment effects, we find that the working poor face a disproportionate share of the job losses. Our results suggest that raising the federal minimum wage continues to be an inadequate way to help the working poor.