Tags: minimum wage | benefits | increase | salaries | poverty level

Minimum Wage Hike Won't Help 'Make Ends Meet,' Reports Show

By    |   Monday, 02 February 2015 09:10 AM

Raising the minimum wage would boost full-time workers' wages to just past the poverty level, but that doesn't automatically mean they'll be able to "make ends meet," as the president insinuated in his State of the Union address, a Washington Post "Fact Checker" report claims.

President Barack Obama is urging Congress to raise the minimum wage nationally from $7.25 an hour to $10.10 per hour, and during his address last month challenged Congress to try to live on the $15,000 or less a year minimum wage earners make.

According to a White House Council of Economic Advisers report, an increase would benefit more than 28 million workers, with 19 million seeing a direct benefit and the others being affected by a shifting wage structure.

The report shows a person who works full time at $7.25 an hour would earn $14,500 annually and be at 76 percent of the federal poverty level if he or she has two children. But if the wages were raised up to $10.10, that person would make $20,200, just above the federal poverty level threshold of $19,073.

But, the Post points out, when wages are raised, a person pays more in taxes while receiving less in benefits, and would see about a 2.8 percent increase on average real income, or about $300.

Further, the impact would also depend on the size of a worker's family and the type of federal or state benefits the family receives.

As it stands now, a single parent earning minimum wage may be eligible to collect earned income tax and child tax credits, welfare cash assistance, food stamps, Medicaid, housing and utility assistance, and food benefits through the Women, Infants and Children program, or, more likely, some combination of the above.

Increasing the minimum wage to $10.10 an hour, however, would disqualify many families from those programs, especially Medicaid, The Post reports.

And while a family on a higher minimum wage may qualify for subsidized coverage under the Affordable Care Act, many would likely not enroll because they would need to pay for their share of the premiums, the Congressional Budget Office reports.

According to an Urban Institute study in Washington D.C., where the minimum wage is going up from $8.25 to $11.50 by next year, a full-time worker with that increase will see a total of $6,760 more in annual earnings.

A single parent with two children, however, won't see all that money after benefits and taxes are calculated — that family's actual disposable income, supposing they are still receiving food stamps and tax credits, will go up just $1,328 a year, the study shows.

For a single parent who collects multiple programs, such as welfare, food stamps, housing assistance, tax credits, and WIC, disposable income will only go up by $227, it shows.

Not all families collect all benefits, though, and the scenario "doesn’t really apply in the real world," said Greg Acs, director of the Urban Institute’s Income and Benefits Policy Center.

Meanwhile, a report from the right-leaning Illinois Policy Institute found that in order to make up for the benefits that would be lost from raising the minimum wage, hourly wages must actually go much higher. For example, in the Chicago area, a parent would need to be earning $38 an hour to make up for lost benefits available when he or she worked for $12 an hour, the report shows.

Further, the Post reports, a raise in minimum wage could hurt workers' purchasing power if the costs of goods and services go up as well.

Also, employers could start cutting jobs or workers hours, or even cut costs by replacing low-wage earners with either machinery or fewer numbers of more productive workers.

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Raising the minimum wage would boost full-time workers' wages to just past the poverty level, but that doesn't automatically mean they'll be able to "make ends meet," as the president insinuated in his State of the Union address, a Washington Post "Fact Checker" report shows.
minimum wage, benefits, increase, salaries, poverty level
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2015-10-02
Monday, 02 February 2015 09:10 AM
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