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THE EFFECTIVENESS OF MINIMUM-WAGE INCREASES IN REDUCING POVERTY: PAST, PRESENT, AND FUTURE

Authors

  • RICHARD V. BURKHAUSER,

    1. Burkhauser: Professor, Department of Policy Analysis and Management, Cornell University, Ithaca, NY 14853 Phone: 607-255-2097, Fax: 607-255-4071, E-mail rvb1@cornell.edu
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      This study was funded in part by the Employment Policies Institute. We thank Ken Couch, Craig Garthwaite, and David Neumark for their comments on earlier versions of this paper. The views expressed here do not necessarily reflect their views or those of the Employment Policies Institute.

  • JOSEPH J. SABIA

    1. Sabia: Assistant Professor, Department of Housing and Consumer Economics, University of Georgia, Athens, GA 30602 Phone: 706-542-4722, Fax: 706-583-0313, E-mail jsabia@fcs.uga.edu
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    • *

      This study was funded in part by the Employment Policies Institute. We thank Ken Couch, Craig Garthwaite, and David Neumark for their comments on earlier versions of this paper. The views expressed here do not necessarily reflect their views or those of the Employment Policies Institute.


Abstract

Extending the work of Card and Krueger, we find minimum-wage increases (1988–2003) did not affect poverty rates overall, or among the working poor or among single mothers. Despite employment growth among single mothers, most gainers lived in nonpoor families and most working poor already had wages above the proposed minimums. Simulating a new federal minimum wage of $7.25 per hour, we find 87% of workers who benefit live in nonpoor families. Poor single mothers receive 3.8% of all benefits. Expanding the Earned Income Tax Credit would far more effectively reduce poverty, especially for single mothers. (JEL J21, J31, J38)

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