Supporters of raising the minimum wage argue that doing so will
reduce poverty. It seems intuitive that raising the minimum wage
would have this effect. Presumably, requiring employers to pay
their lowest-paid employees more would lift large numbers of
low-income households out of poverty. But the evidence shows
that this does not happen.
Despite supporters' good intentions, a higher minimum wage
will not reduce poverty. This is true for three main reasons.
First, the only workers who benefit from a higher minimum
wage are those who actually earn that higher wage. Raising the
minimum wage reduces many workers' job opportunities and working
Second, few minimum-wage earners actually come from poor
Third, the majority of poor Americans do not work at all,
for any wage, so raising the minimum wage does not help them.
The Minimum Wage Does Not Reduce
Supporters argue that a higher minimum wage is an effective
anti-poverty tool. If businesses must pay their low-wage employees
more, then those workers should earn more and fewer of them should
live in poverty. Common sense says a higher minimum wage should
The facts, however, show otherwise. Many economists have
examined the evidence and come to the surprising conclusion
that the minimum wage does not reduce poverty. Ohio University
economists Richard Vedder and Lowell Gallaway examined the effect
that increases in the minimum wage had on the overall poverty rate
in the United States and on the poverty rates for groups like
minorities and teenagers that might especially benefit from
higher minimum wages. They found that the minimum wage had no
statistically detectable effect on poverty rates.
Other researchers have approached the evidence in different ways
and reached the same conclusion. For example, economists David
Neumark of the University of California-Irvine, Mark Schweitzer of
the Federal Reserve Bank of Cleveland, and William Wascher of
the Federal Reserve Board examined how the minimum wage
affects the incomes of families living near the poverty line. In a
series of papers, they repeatedly reached the same conclusion
as Vedder and Gallaway: A higher minimum wage does not lift
low-income families out of poverty. Their results were
The answer we obtain to the question of whether minimum wage
increases reduce the proportion of poor and low-income
families is a fairly resounding "no." The evidence on both
family income distributions and changes in incomes experienced by
families indicates that minimum wages raise the incomes of
some poor families, but that their net effect is to increase the
portion of families that are poor and near-poor.
Whether measured by the poverty rate or by the earnings of
low-income families, the minimum wage does not help the poor.
Higher Minimum Wages Cost jobs and
A major reason why the minimum wage is such an ineffective
anti-poverty tool is that minimum-wage hikes cause businesses to
reduce the number of workers they hire and the hours they ask their
employees to work. According to Neumark et al., for
Workers who initially earn near the minimum wage experience
wage gains. But their hours and employment decline, and the
combined effect of these changes on earned income suggests net
adverse consequences for low-wage workers.
suggest that each 10 percent increase in the minimum wage reduces
employment in affected groups of workers by roughly 2 percent. Thus,
raising the minimum wage to $7.25 an hour would cost at least 8
percent of affected workers their jobs. A higher minimum wage helps
only those workers who actually wind up earning that wage and
further disadvantages lower-income workers, who suffer fewer job
opportunities and working hours. Though intended to help low-income
families get ahead, the minimum wage instead costs some their
jobs and others hours at work. This leaves poor families actually
Few Minimum-Wage Workers Are Poor
Another reason for the failure of higher minimum wages to
reduce poverty is that the vast majority of minimum-wage workers do
not live in poverty. Much of the benefit of a higher minimum wage
accrues to suburban teenagers and college students, not the heads
of poor families. A majority of minimum-wage earners are between
the ages of 16 and 24, and over three-fifths of minimum-wage
earners work part-time. The average family income of a minimum-wage
earner is almost $50,000, and less than one in five live at or
below the poverty line.
It therefore should not be surprising that higher minimum wages
do little to benefit poor families when minimum-wage workers are
only slightly more likely to be poor than is the population as a
Members of Poor Families Work Less
Higher minimum wages do not address the main reason that most
poor families live below the poverty line. Contrary to what
many assume, low wages are not the primary problem, because most
poor Americans do not work for the minimum wage. The problem is
that most poor Americans do not work at all. Table 1 shows the work
status of individuals 16 years and older who lived below the
poverty line in 2005.
As the table demonstrates, over three-fifths of individuals
living below the poverty line did not work, and only 11 percent
worked full-time year-round. Families are poor not because they
earn low wages but because they do not have full-time jobs. The
median family with children living below the poverty line works
only 1,040 hours a year in total. That is only 20 hours per
week. If at least one parent in every poor household worked
full-time year-round, the child poverty rate in the United States
would plummet by 72 percent. Raising the minimum wage does not
address this problem and, by causing businesses to hire fewer
workers, actually makes it harder for potential workers to find
Extensive research shows that the minimum wage does little to
reduce poverty. While this may appear counterintuitive, deeper
analysis reveals three reasons behind the minimum wage's
First, a higher minimum wage causes employers to cut back
on both the number of workers they hire and their employees'
Second, the beneficiaries of higher minimum wages are
unlikely to be poor because most minimum-wage earners are not
Finally, few individuals living in poverty work at
minimum-wage jobs or any job.
For all its advocates' good intentions, raising the minimum wage
will not reduce poverty in America.
James Sherk is
Bradley Fellow in Labor Policy in the Center for Data Analysis at
The Heritage Foundation.
 See Richard K. Vedder and Lowell E.
Gallaway, "Does the Minimum Wage Reduce Poverty?" Employment
Policies Institute, June 2001, at
(December 28, 2006).
 David Neumark, Mark Schweitzer, and
William Wascher, "The Effects of Minimum Wages Throughout the Wage
Distribution," The Journal of Human Resources, Spring
2004, pp. 425-450; David Neumark, Mark Schweitzer, and William
Wascher, "The Effects of Minimum Wages on the Distribution of
Family Incomes: A Non-Parametric Analysis," forthcoming in
Journal of Human Resources; and David Neumark and William
Wascher, "Do Minimum Wages Fight Poverty?" Economic Inquiry,
July 2002, pp. 315-333.
 Neumark, Schweitzer, and Wascher, "The
Effects of Minimum Wages on the Distribution of Family Incomes."
Note that though this paper is forthcoming, it is available as
National Bureau of Economic Research Working Paper No. 6536
at . The quote is from page 30
of the Working Paper version.
 Neumark, Schweitzer, and Wascher, "The
Effects of Minimum Wages Throughout the Wage Distribution," p.
 See, for example, Neumark, Schweitzer,
and Wascher, "The Effects of Minimum Wages Throughout the Wage
Distribution," p. 442; Stephen Bazen and Velayoudom Marimoutou,
"Looking for a Needle in a Haystack? A Re-examination of the Time
Series Relationship Between Teenage Employment and Minimum Wages in
the United States," Oxford Bulletin of Economics and
Statistics, Vol. 64, Supplement (2002), pp. 699-725; and David
Neumark and William Wascher, "Employment Effects of Minimum and
Subminimum Wages: Reply to Card, Katz, and Krueger," Industrial
and Labor Relations Review, Vol. 47, No. 3 (April 1994), pp.
 Robert E. Rector and Rea S. Hederman,
Jr., "The Role of Parental Work in Child Poverty," Heritage
Foundation Center for Data Analysis Report No.
CDA03-01, January 29, 2003, Table 1, at .