Minimum Wage Increase Hits the Bulls’ Eye

Social or labor market policies are measured by their reach, their adequacy, and their costs. By these metrics, a minimum wage increase is a slam dunk. A generation of research now demonstrates pretty decisively that markets can accommodate a reasonably higher minimum at no significant threat to job creation—especially when ancillary gains (productivity gains, less turnover, increase in aggregate demand) are taken into account. Raising the minimum wage makes almost no demands on the public purse, and could in fact recoup much of the current public subsidy (through working families’ reliance on means-tested tax credits, cash assistance, health care, and food security programs) of low-wage employment. Even a small increase promises to make a big difference: in 2013, Arin Dube estimated that an increase to $10.10 would raise the incomes of poor families (those at the 10th percentile) by 12 percent and lift five to seven million out of poverty. An increase to $12 would likely have even larger poverty-fighting effects.

While much of our social and tax policy is either poorly targeted (it reaches the poor unevenly) or aimed in in the wrong direction (it benefits those who don’t need it), a minimum wage increase hits the bull’s-eye. As EPI’s new estimates of the impact of the “Raise the Wage Act” (bringing the minimum to $12.00/hour by 2020) underscore, the benefits of an increase would flow overwhelmingly to those—young workers, single parents, workers of color—who need it the most. The interactive graphic below summarizes this important new work: the first menu sorts workers by race, the second by income, age, family status, labor force participation, and educational attainment.