Will Raising Minimum Wage Lift Low-Income Families Out of Poverty?

Action to raise the federal minimum wage level of $7.25/hour is stalled in Congress, yet localities and states from the Seattle area to New Jersey are raising their own minimum wage levels in efforts that sometimes have broad, bi-partisan support. When Brookings scholars talk about the effects of raising the minimum wage, they consider the policy as just one part of a multi-faceted approach to addressing the problems of poverty and lack of social mobility into the middle class. Here are some of those ideas:

Alan Berube and Elizabeth Kneebone put the recent SeaTac living wage measure into the larger context of confronting suburban poverty (they are co-authors of a book by that name), writing that “suburban poverty is in large part about the suburban economy.” They cautioned that:

Addressing suburban poverty at scale ultimately demands suburban collaboration. If the SeaTac measure wins [it did] but subsequently leads to greater economic competition (“border wars”) among South King County suburbs, which are just beginning to explore areas beyond education for stepped-up collaboration, it could be a step in the wrong direction.

Richard Reeves includes a higher minimum wage as just one policy prescription in a list of policy items intended to strengthen the middle class.

Isabel Sawhill found that “increasing the minimum wage would go a long way to help those in the bottom-third of the income distribution who are currently supported by sub-$9/hour earners. The higher minimum wage would boost these household’s earnings by about 19%.” In a blog post focused on this one strategy to assist low-income families, one of many that was the subject of a paper she co-authored in July, Sawhill wrote that:

Overall, we think that a higher minimum wage should be one part of a larger strategy to improve the economic prospects of low-income families. Alone, it won’t make a big impact, but combined with policies that lower unemployment, boost earnings (e.g., the Earned Income Tax Credit), and improve education, it could help more families move into the middle class.

In testimony last year to the Senate Finance Committee, Ron Haskins put a human face on the issue of the minimum wage:

If a lone mother worked year-round, full-time at the minimum wage ($7.25 per hour), with no vacations and no time off for illness or to care for sick children, she would earn $15,080, about $2,500 below the poverty level for a mother and two children.

Haskins’ remarks focused on the wider problem of poverty and trends and strategies to fight it.

In 2009, with the economic recession continuing, Gary Burtless examined the effect then of raising the federal minimum wage to its current level of $7.25/hour. He said then that “the main effect is going to be low-wage workers will have a higher pay today than they had yesterday and there will be … virtually no detectable effect on employment.”

Raising the minimum wage today has broad support in America. In their 2013 Economic Values Survey with the Public Religion Research Institute, E.J. Dionne, Bill Galston and others reported on Americans’ views on the minimum wage (plus a host of other views on capitalism, government and economic policy). They found that 73 percent of Americans favor increasing the federal minimum wage to $10.00/hour. Support when disaggregated by political affiliation: Democrats (88%); Independents (73%); Republicans (50%).

Get more research and commentary about the minimum wage and social mobility from the Social Mobility Memos blog.