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July 1990, Vol. 113, No. 7
Raising the minimum wage: effects on family poverty
Ronald B. Mincy
Disemployment effects and weak links among low wages, low income, and poverty have been at the center of the debate about the poverty-reducing effect of a higher minimum wage. Recent studies do not settle the debate. Charles Brown, Andrew Kohen, and Curtis L. Gilroy concluded that disemployment effects are small.1 But Edward M. Gramlich and Terrence Kelly showed that most low-wage workers are not poor.2 Several recent studies, using a variety of methods and data sources, confirm this result.3 Most economists analyzing the subject conclude from this evidence that a higher minimum wage is a poor tool for fighting poverty. But economists who specialize in studies of the poor concentrate on changes that have occurred while the minimum wage remained at its 1981 level. For example, between 1981 and 1986, the poverty line for a family of three increased from $7,250 to $8,737 (20.5 percent) and the number of poor workers increased from 8.6 to 8.9 million (2.7 percent).4 Anxious for ways to reduce working poverty that do not affect the Federal budget, poverty specialists still favor a higher minimum wage.5
Analysts on both sides of this debate neglect important barriers to reducing poverty through raising the minimum wage. These barriers are related to (1) the provisions of the minimum wage law, (2) the characteristics of low-wage workers, and (3) the characteristics of poor families with low-wage workers.
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1 Charles Brown, Curtis L. Gilroy, and Andrew Kohen, "Effects of the Minimum Wage on Employment and Unemployment," Journal of Economic Literature, June 1982, pp. 487-528.
2 Edward M. Gramlich, "Impact of Minimum Wages on Other Wages, Employment and Family Income," Brookings Papers on Economic Activity 2, 1976, pp. 409-51; and Terrence Kelly, Two Policy Questions Regarding the Minimum Wage (Washington, The Urban Institute, 1976).
3 Carolyn S. Bell, "Minimum Wages and Personal Income," paper presented at the American Enterprise Institute Conference on Legal Minimum Wages (Washington, 1979); Robert V. Burkhauser and T. Aldrich Finegan, The Minimum Wage and the Poor: The End of a Relationship, Working Paper, 87-221 (Nashville, TN, Vanderbilt University, 1987);William R. Johnson and Edgar K. Browning, "The Distributional and Efficiency Effects of Increasing the Minimum Wage: A Simulation," American Economic Review, March 1983, pp.204-11; Andrew Kohen and Curtis L. Gilroy, "The Minimum Wage Income Distribution and Poverty," Report of the Minimum Wage Study Commission, March 1981, pp.1-30; Donald O. Parsons, Poverty and the Minimum Wage (Washington, 1980).
4 U. S. Bureau of the Census, Current Population Reports, Series P-60, Nos. 138 and 160.
5 David T. Elwood, Poor Support: Poverty in the American Family (New York, Basic Books, 1988); Sar A. Levitan and Issac Shapiro, Working But Poor: America's Contradiction (Baltimore, The Johns Hopkins University Press, 1987); Isabel V. Sawhill, "Poverty and the Underclass," in Challenge to Leadership: Economic and Social Issues for the Next Decade (Washington, 1988);
Poverty areas and the 'underclass:' untangling the web.Mar. 1991.
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