Despite widespread support by Congress for increasing the minimum wage from $5.15 per hour to $7.25 per hour, a UGA housing and consumer economics faculty member says the plan won’t alleviate poverty, just as past minimum wage increases have not alleviated poverty.
“Minimum wage increases are useless at best and downright harmful at worst,” according to Joseph Sabia, an HACE assistant professor in the College of Family and Consumer Sciences.
“They should be abandoned and put in the museum of antiquated antipoverty policies,” Sabia told the U.S.Senate Finance Committee on Jan. 10, a day before the wage increase passed the U.S. House of Representatives. It’s expected that the bill will likewise be successful in the Senate.
Sabia discussed the findings of research he conducted with Richard Burkhauser of Cornell University that showed minimum wage increases had no effect on overall poverty rates, on poverty rates among workers or on poverty rates of working single mothers between 1989 and 2004. The researchers used information from U.S. Census data for their study.
“Individuals cannot be lifted out of poverty by a minimum wage increase if such a hike causes them to lose their jobs or have their hours significantly reduced,” Sabia said. “The evidence is overwhelming that the least-skilled workers experience the strongest disemployment effects from minimum wage increases. Those workers most harmed are disproportionately workers without a high school diploma, young African Americans and single mothers.”
Sabia also explained to the senators that unlike in 1938 when the minimum wage was first mandated, 87 percent of workers who will benefit from the current wage hike don’t live in poor households.
Although Sabia voiced strong objections to increasing the minimum wage, he did offer the senators what he called a far more effective antipoverty tool—the Earned Income Tax Credit, which provides tax credits to workers in poor families. Currently, a minimum wage worker from a low-income family with at least two children can gain a credit of 40 cents for every dollar in wages earned. Such employees have an effective wage of $7.21 per hour, according to Sabia.
Although passage of the minimum wage increase is likely, Sabia said his research agenda isn’t influenced by “short-run political feasibility.
“The job of an empirical researcher is to seek the truth through a critical analysis of the scientific evidence,” he said. “And the evidence shows that encouraging employment is the best way to combat poverty.
“Rather than raise the minimum wage, which makes finding work harder and hurts the poor, the Congress should have expanded the EITC,” Sabia added. “If the Congress isn’t ready for these facts, perhaps future Congresses, state legislatures and local municipalities will listen.”
