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The minimum wage and welfare reform

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A weekly presentation of downloadable charts and short analyses designed to graphically illustrate important economic issues. Updated every Wednesday.

Snapshot for September 27, 2000

The minimum wage and welfare reform
While the federal minimum wage is set at $5.15, some states have experimented with higher minimum wage levels. Oregon was one of those states, raising its state minimum to $6.50 in 1999. This increase coincides with a period wherein many women were leaving the welfare rolls for the low-wage labor market, as mandated by welfare reform. The figure shows how complementary these two policies have been.

Minimum wage increases and wages of recent welfare leavers

The top line tracks the average inflation-adjusted wages of former welfare recipients who became full-time workers. Between 1993 and 1996, their average wages trended down, along with the real value of the minimum. But starting in 1996, the increase in the state’s minimum wage clearly lifted their earnings. In fact, the graph shows that each time Oregon’s minimum wage was raised, the average wage of the state’s welfare leavers also went up. Clearly, the policy of a higher state minimum wage has helped raise the living standards of those women trying to make a living in the low-wage labor market.

Source note: This graph will appear in the Oregon Center for Public Policy’s (OCPP) forthcoming report, Oregon’s Increasing Minimum Wage Brings Raises to Former Welfare Recipients and Other Low-Wage Workers Without Job Losses, by Jeff Thompson, which will be available online at www.ocpp.org.

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