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

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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