Recently, the union-backed Economic Policy Institute released a study that determined, “raising wages would significantly reduce reliance on public assistance.” They reached this conclusion after examining eligibility data on federal and state means-tested programs for low-income families and making projections based on this information. But in doing so they conveniently avoided past evidence that directly challenges their conclusion. We looked at the numbers, and they tell a different story.
In the most comprehensive analysis on this topic to date, Dr. Joseph Sabia and Thanh Tam Nguyen of San Diego State University conclude that minimum wage increases at both the federal and state level have no impact on participation in or spending on public benefits programs. The authors analyzed 35 years of data across multiple data sets to study the impact of minimum wage increases on six major social programs, including Supplemental Nutritional Assistance Program, Medicaid, Temporary Assistance for Needy Families and the Program for Women, Infants, and Children.
Sabia and Thanh identify two factors to explain this finding. First, minimum wage increases are poorly targeted to public benefits recipients. For example, just 12 percent of those affected by a $15 minimum wage are SNAP recipients, and only 10 percent are Medicaid recipients. In brief, today most employees affected by a $15 minimum wage are not in families classified as poor. Second, the authors confirm that minimum wage increases cause some loss of employment opportunity, counteracting positive effects from those who aren’t negatively impacted. Economists at Trinity and Miami Universities estimated the impact of a $12 wage by 2020 using methodology developed by the nonpartisan Congressional Budget Office, and estimated that it would cause roughly 770,000 Americans to lose their jobs.
This kind of rose-colored analysis is par for the course at the Economic Policy Institute, which has a long history of churning out analyses to support the agenda of its labor union donors. The facts are clear: The minimum wage has proven to be an ineffective means of eliminating poverty, and often harms those that it intends to help.