How Much Does the Minimum Wage Help the Poor

It's taken as a given by most people that the minimum wage is beneficial on net, and that it helps the poor.*

Thomas MaCurdy has a new piece on this in the Journal of Political Economy (one of the A+ journals) entitled "How Effective Is the Minimum Wage at Supporting the Poor?" (you can't get this directly without paying for it, but you can go through our library).

Proponents of minimum wages assert that the gross benefit to those who get higher wages outweighs the gross cost on those who lose jobs or suffer deadweight losses. There is a presumption in this argument that the benefits and costs both accrue to the poor.

MaCurdy shows that the benefits do not occur mostly to the poor: only 14% of benefits go to families on welfare, only 13% to the slightly different set of families supported primarily by low wage workers, and only 35% to families whose income is twice the poverty level (that's $48.5K for a family of four ... about what an assistant professor in biology earns at SUU).

Who gets the other benefits? I'm generalizing, but broadly it's teenage children of white middle and upper class parents.

* Note that opposition to the minimum wage on economic grounds is that 1) theoretically it must help some people and hurt others, and 2) that evaluating the net benefit/cost is an empirical question that is still open (but articles like the one cited here are getting pretty definitive). Political opposition to the minimum wage is rarely this nuanced.

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Discussions in class, and after class, makes me thing that my view here is being interpreted incorrectly. What I'd prefer is to replace thinking exemplified by this statement:

Let's raise the minimum wage to help the poor.

With this statement:

Let's raise the minimum wage to help the poor.

Even better, I'd like people to recognize that the first statement should really be written like this:

Let's raise the minimum wage, that mostly gets paid to rich white kids, to help the poor.

If we did that, it might be easier to get people to see that this next statement is an improvement.

Let's raise the minimum wage, that mostly gets paid to rich white kids, to help the poor.