Tags: minimum | wage | poor | tax

UC Irvine's Neumark: Minimum Wage Hike Would 'Do Little' for Poor Families

By    |   Tuesday, 08 July 2014 02:38 PM

President Obama and others who advocate a minimum wage increase claim it is necessary to help low-income families.

"But a higher minimum wage would do little for such families," David Neumark, an economist at University of California, Irvine, writes in The Wall Street Journal. "Minimum wages are ineffective at helping poor families because such a small share of the benefits flow to them."

There are three reasons for that, he says.

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First, many low-wage workers come from higher-income families. These workers aren't the families' main earners and frequently account for only a small portion of their families' income, Neumark argues.

Second, some workers in poor families earn more than the minimum wage but don't work enough hours to make decent money, he notes.

And finally, in about 50 percent of poor families, no one works. So a minimum wage increase doesn't help them.

"This evidence suggests we should consider alternative policies," Neumark states. Increasing the Earned Income Tax Credit would be more helpful, he says, because it "directly targets low-income families, rather than low-wage workers."

"The desire to help poor and low-income families is understandable. But increasing the minimum wage is a misguided way to do it."

Meanwhile, some small business owners say a minimum wage hike would hurt them.

Laurie Thomas, who owns Nice Ventures, a restaurant management company in San Francisco, is one. An increase would be "daunting" and likely push her prices up by at least 15 to 20 percent, Thomas tells CNNMoney. In addition, she says she might have to let some employees go.

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President Obama and others who advocate a minimum wage increase claim it is necessary to help low-income families.
minimum, wage, poor, tax
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2014-38-08
Tuesday, 08 July 2014 02:38 PM
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