Minimum Wages and Poverty

Can Raising the Minimum Wage Reduce Poverty and Hardship?

  • Joseph Sabia, San Diego State University
  • Robert Nielsen, University of Georgia

In this unique study, two economists go beyond poverty rates and measure the impact of a higher minimum wage on various forms of hardship. Using data from the Census Bureau’s Survey of Income and Program Participation, they construct a number of measures of hardship, including the following:

  • Financial insecurity: Does the wage earner have difficulty in paying medical or utility bills, or making a mortgage payment?
  • Housing insecurity: Has the wage earner missed rent payments in the last year, or do they have unaddressed housing problem like broken windows?
  • Health insecurity: Did the wage earner go with- out health insurance, or miss a doctor’s visit?
  • Food insecurity: Has the wage earner lacked sufficient resources to purchase food or eat a balanced meal?

Across all measures, the authors find no statistically significant evidence that a higher minimum wage has helped reduce financial, housing, health, or food insecurity. This is true across all employees in general, and for smaller sub-sets of the less-educated and less-experienced.

As one explanation of their findings, the authors show that over half (54.7 percent) of poor, less-educated individuals between ages 16 and 64 do not work. A similar percentage (53.6 percent) of individuals who report missing a rent or a mortgage payment do not work. Thus, many of the people policymakers are trying to help won’t benefit because they’re not working.