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December 23 2015

Will Higher Minimum Wages Really Get Welfare Recipients Back to Work?

Patrice J. Lee

Protestors fighting for a $15 minimum wage sometimes use the argument that such a high wage inspire Americans receiving public benefits to rejoin the work force.

At first glance, this seems plausible and has been bolstered by a few progressive reports.

But now a new, more comprehensive report, spanning three decades of data, blows up this seemingly correct assertion.

A report by the Employment Policies Institute finds that on net, minimum wage increases have little or no effect on workforce participation or on taxpayer spending on social welfare programs. According to this report, federal and state minimum wage increases have no measurable on recipients on Supplemental Nutritional Assistance Program (SNAP), Medicaid, Temporary Assistance for Needy Families (TANF) and the Women, Infants, and Children (WIC) program.

In fact, the report found evidence that minimum wage increases lead to an increase in poor people using free and reduced-price lunches and housing subsidies.

Minimum wage increases also create winners and losers among sub-groups of minimum wage earners. Losers include women with less work experience and young adults without a high school diploma.

A $15 per hour wage is not targeted so just 12 percent of SNAP recipients and 10 percent of Medicaid recipients would be affected.

The researchers came to these conclusions after examining 35 years of government data  from a variety of datasets, which is more sweeping than the data used to produce previous studies on the subject.

The Wall Street Journal reports:

“We were trying to bring some more harmony and understanding across the different studies” that have already been conducted, said Joseph Sabia, an associate professor in San Diego State University’s economics department. He conducted the research with graduate student Thanh Tam Nguyen.

Mr. Sabia said higher minimum wages did help some workers get off the welfare rolls but others stayed stuck because of adverse employment effects such as a reduction in jobs or hours worked. While each 10% minimum wage increase resulted in reduced receipt of SNAP and WIC, for example, the amounts weren’t statistically significant and at the same time the receipt of school-nutrition assistance and housing assistance increased.

“Minimum-wage increases redistribute the income of low-skilled workers, helping some, hurting others,” Mr. Sabia said, and added that there’s scant evidence minimum-wage boosts reduce welfare caseloads or public spending on needs-based public programs. He said expanding the earned-income tax credit program would be a “far better” tool.

What we really need is to see economic growth that lifts wages across the board coupled with incentives that make the transition from dependency to independence enticing. American workers should be thinking in terms of a thriving economy with maximum wages, not mandated minimums that may even be too much for some businesses to remain profitable in this anemic economy.

IIndependent Women's Forum is an educational 501(c)(3) dedicated to developing and advancing policies that aren’t just well intended, but actually enhance people’s freedom, choices, and opportunities. IWF is the sister organization of the Independent Women’s Voice.​
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