Minimum wages, poverty, and material hardship: new evidence from the SIPP
While a number of policymakers have argued that raising the minimum wage will reduce material hardship, empirical evidence to support or refute this claim is scant. Using data drawn from the Survey of Income and Program Participation, we examine the effect of minimum wage increases on poverty, material hardship, and government program participation. Difference-in-difference estimates provide little evidence that state and federal minimum wage increases between 1996 and 2007 reduced poverty, material hardship, or receipt of public program benefits among all individuals, workers, younger individuals without high school degrees, or younger black individuals. Our findings are robust across several measures of hardship, including poverty, financial hardship, housing stress, food insecurity, durable goods deprivation, and health insecurity. We find some evidence of modest redistribution effects of the minimum wage among low-skilled individuals.
KeywordsMinimum wage Material hardship Poverty
JEL ClassificationJ38 I32 I38
The authors thank Al Gottschalck, Carolyn Hronis, and Sharon O’Donnell for providing valuable information about constructing our files. Thanks also to Michael Saltsman and an EPI reviewer for useful comments and suggestions on an earlier draft of this paper and to Alex Chesney, Andrew Barone, and Melissa Wilmarth for editorial assistance. This research was funded, in part, by the Employment Policies Institute. Work on an earlier draft of this paper was completed when Sabia was an assistant professor at the United States Military Academy. Any errors that appear are the authors.
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