Economists agree: Raising the minimum wage reduces poverty Economists agree: Raising the minimum wage reduces poverty By Mike Konczal at the Washington Post washingtonpost/blogs/wonkblog/wp/2014/01/04/economists-agree-raising-the-minimum-wage-reduces-poverty/ SNIP................................ But instead of diving into that controversy, let’s take a look at where these economists, and all the other researchers investigating the minimum wage, do agree: They all tend to think that raising the minimum wage would reduce poverty. That’s the conclusion of a major new paper by Dube, titled “Minimum Wages and the Distribution of Family Incomes.” Let’s first highlight the major results. Dube uses the latest in minimum-wage statistics and finds a negative relationship between the minimum wage and poverty. Specifically, raising the minimum wage 10 percent (say from $7.25 to near $8) would reduce the number of people living in poverty 2.4 percent. (For those who thrive on jargon, the minimum wage has an “elasticity” of -0.24 when it comes to poverty reduction.) Using this as an estimate, raising the minimum wage to $10.10 an hour, as many Democrats are proposing in 2014, would reduce the number of people living in poverty by 4.6 million. It would also boost the incomes of those at the 10th percentile by $1,700. That’s a significant increase in the quality of life for our worst off that doesn’t require the government to tax and spend a single additional dollar. And, given that this policy is self-enforcing with virtually no administrative costs while challenging the employer’s market power, it is a powerful complement to the rest of the policies the government uses to boost the living standards of the worst off, including the Earned Income Tax Credit, food stamps, Medicaid, etc. .... As many economists have argued, the minimum wage ”substantially ‘held up’ the lower tail of the U.S. earnings distribution” through the late 1970s, but this effect stopped as the real value of the minimum wage fell in subsequent decades. This gives us an empirical handle on how the minimum wage would help deal with both insufficient low-end wages and inequality, and the results are striking. ..................................SNIP
Posted on: Sun, 20 Jul 2014 17:47:56 +0000
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