Home
/
RELIGION & LIBERTY ONLINE
/
Why Minimum Wages Increases Don’t Target Poverty
Why Minimum Wages Increases Don’t Target Poverty
Jan 25, 2026 3:44 PM

If you ask most people why they support raising the minimum wage they’ll says it’s because it helps the poor. But as David Neumark, a scholar at the Federal Reserve Bank of San Francisco notes, numerous studies have shown that there is no statistically significant relationship between raising the minimum wage and reducing poverty.

That finding may appear to be counterintuitive. After all, if poor people have low wages then increasing their wages should help reduce their poverty. To some extent, this is true. However, what is overlookedis that minimum wages target individual workers with low wages, rather than families with low es. The reason that distinction is important is because most workers who earn the minimum wage are in e families.

That es more obvious when you think about position of the American workforce. If you are from a middle-class family, your first job is likely to have paid minimum wage. The same goes for all your friends who are from families higher on the economic ladder. And it’s the same for young workers today. Go down to the mall and you’ll find that the young men and women working in Forever 21 and Abercrombie & Fitch are not from families that are in poverty. Increasing the minimum wage merely ensures that these young people who are (mostly) from wealthier families get a pay raise.

The relationship between being a low-wage worker and being in a e family is fairly weak, as Neumark explains, for three reasons:

First, 57% of poor families with heads of household ages 18–64 have no workers, based on 2014 data from the Current Population Survey (CPS). Second, some workers are poor not because of low wages but because of low hours; for example, CPS data show 46% of poor workers have hourly wages above $10.10, and 36% have hourly wages above $12. And third, many low-wage workers, such as teens, are not in poor families (Lundstrom ing).

Considering these factors, simple calculations suggest that a sizable share of the benefits from raising the minimum wage would not go to poor families. In fact, if wages were simply raised to $10.10 with no changes to the number of jobs or hours, only 18% of the total increase in es would go to poor families, based on 2010–2014 data (Lundstrom ing). The distributional effects look somewhat better at a higher threshold for low e, with 49% of the benefits going to families that have es below twice the poverty line. However, 32% would go to families with es at least three times the poverty line. By this calculation, about a third of the benefits would go to families in the top half of the e distribution.

Moreover, if we consider raising the minimum wage higher, for example to $12, only 15% of the benefits go to poor families, because other higher-wage workers who would benefit are less likely to be poor. Likewise, 35% would go to families with es at least three times the poverty line. With a $15 minimum wage the corresponding figures would be 12% and 38%. This evidence—coupled with the fact that employers who would pay the higher minimum wage are not necessarily those with the highest es, but instead may be owners of small businesses with low profit margins—indicates that minimum wages are a very imprecise way to raise the relative es of the e families.

Some people might claim that even if the minimum wage mostly benefits wealthier families we should still do it since there is some benefit to the poor. But this is another case of failing to consider the difference between what is seen and what is not seen. What is seen is that some poor workers get a pay raise; what is unseen is that many more will simply be unable to find work.

From 2006 to 2012, the average effective minimum wage rose by $1.72 across the United States. Economist Jeffrey Clemens released a paper last month that examines the effect of that wage increase on low-skilled workers:

My baseline estimate is that this period’s minimum wage increases reduced employment among individuals ages 16 to 30 with less than a high school degree by 5.6 percentage points. This amounts to 43 percent of the decline in this group’s employment between 2006 and 2012. Further, it accounts for a 0.49 percentage point decline in the employment to population ratio across all individuals ages 16 to 64.

Not only did the effect of the minimum wage account for nearly half of the unemployment effect on young workers without a high school degree, it lead to nearly a half a percentage point effect on all unemployment.

Keep in mind that this effect was because of a $1.72 increase over a six-year period. Several cities and states plan to raise the minimum wage to $15 an hour—nearly 70 percent more than the current federal minimum wage—over the next two years.

While the change may be a boon to the middle-class kids working at the mall, the effect on low-skilled workers will be devastating. But politicians get elected by doing what is popular (and minimum wage increases are popular) not for doing what is best for the most vulnerable members of our society. Until more people understand how minimum wage laws harm the poor, the kids at the Gap will continue to get more spending money while the poorestworkersstay unemployed.

Comments
Welcome to mreligion comments! Please keep conversations courteous and on-topic. To fosterproductive and respectful conversations, you may see comments from our Community Managers.
Sign up to post
Sort by
Show More Comments
RELIGION & LIBERTY ONLINE
Video: Rev. Robert Sirico on the Vatican’s targeting of evangelical and Catholic collaboration
President and Co-Founder of the Acton Institute, Rev. Robert Sirico, was recently interviewed on EWTNby news anchor Raymond Arroyo to discuss a recent controversial article published by La CiviltàCattolica. The article, approved by the Vatican, received much criticism because it targeted “conservative evangelical and Catholic collaboration around social issues.” Sirico parses the issues revolving around the article, stating how the article was “not substantive and did not exhibit any kind of real understanding of evangelicalism or of conservative, traditional Catholicism.”...
Reading ‘Democracy in America’ (Part 4): The long shadow of the French Revolution
This is the fourth part in a series on how to read Alexis de Tocqueville’s Democracy in America. Read the Introduction and follow the entire series here. In the previous installment, we considered feudalism as a class system of mutual responsibilities centered on land. Land was the basis of wealth during the medieval period. But by the 12th century, land was slowly being replaced by trade as the main generator of wealth in Europe. That basic shift and the subsequent...
The cramped morality of trade protectionism
“If a product is seen only as the opportunity for work, it is certain that the anxieties of protectionists are well founded.” –Frédéric Bastiat, Economic Sophisms Drawing inspiration from a 1847 essay by the inimitable Frédéric Bastiat, economist Donald Boudreauxtackles a popular argument from today’s trade protectionists: namely, “that protectionism is justified if enough consumers or voters are willing to pay higher prices in order to help workers.” The problem, of course, is that such a perspective debases the value...
The anti-capitalist roots of American anti-Semitism
Over the past week Americans have been debating the removal of Confederate statues from our public spaces. The discussion was prompted by the white nationalist protest in Charlottesville, Virginia that was supposedly in response to the plan to take down the statue of Confederate general Robert E. Lee. But if the rally was about a statue, why were the protestors shouting about Jews? “Once they started marching, they didn’t talk about Robert E. Lee being a brilliant military tactician,” says...
How the invisible hand reduces industry costs
Note: This is post #45 in a weekly video series on basic microeconomics. petitive markets, the market price—with the help of the Invisible Hand—balances production across firms so that total industry costs are minimized. In this video by Marginal Revolution University, economist Alex Tabarrok explains petitive markets also connect different industries. By balancing production, the Invisible Hand of the market ensures that the total value of production is maximized across different industries. (If you find the pace of the videos...
The socialist threat to Catholic schools in Spain
The Spanish government is currently run by the center-Right People’s Party, led by Mariano Rajoy. However, should Spain’s socialist parties return to power, they have announced their intention to remove Catholic education from the curriculum and replace it with a secular curriculum that teaches fidelity to the government. In place of voluntary religious education, the socialists of Spain would impose secular and progressive “Education for Citizenship and Human Rights” (EfC). In this way, socialism could use government funding to bring...
Our economic age of anxiety
“Developed nations are increasingly haunted by doubts about the legitimacy of their economic structures,” says Victor V. Claar and Greg Forster in this week’s Acton Commentary. “This paralyzing anxiety crosses all lines of ethnicity, religion, class, party and ideology.” This is not a mere selfish concern about who gets how much of what. It is a moral anxiety, a concern about what kind of people we are ing. Is America still a country where it pays to “work hard and...
Why Christians must get poverty and inequality right
Over the last two decades, global poverty has plummeted and the world’s poorest people have steadily climbed out of the shadow of death. Yet many Christians cannot distinguish between dire poverty and e inequality, falsely believe both are worsening, and oppose the very policies that have lifted the world’s poor out of malnutrition. “Why do we underestimate success?” asks Philip Booth in a new essay forReligion & Liberty Transatlantic. “Why do we accept fake news about these issues?” Booth– a...
Parents’ inalienable rights over their children’s education and religious instruction
As children in the U.S. return to school, their European contemporaries have or soon will join them. However, they do so in a context that recognizes fewer of the traditional rights that society has accorded parents over the education of their children, especially whether they are taught to uphold or disdain their family’s moral and religious views. Grégor Puppinck, Ph.D., the director of theEuropean Centre for Law and Justice (ECLJ), addressed the rights that parents rightfully exercise over their children’s...
Radio Free Acton: Ismael Hernandez on the recent ‘Detroit’ film and Jacqueline Isaacs on Libertarian Christians
This week on Radio Free Acton, we ask Ismael Hernandez, founder and president of the Freedom and Virtue Institute to give his opinions on the new film “Detroit,” depicting the 1967 12th Street Riots. Hernandez states for listeners how “it is important to know that every time you see a portrayal of a historical event, you need to be able to separate fact from narrative…we have to be able to understand that we are being sold a narrative with the...
Related Classification
Copyright 2023-2026 - www.mreligion.com All Rights Reserved