Want a poor tool for reducing poverty? Try the minimum wage

The Cato Institute is highlighting a new bulletin (PDF) from San Diego State University economist Joseph Sabia on the relationship between a government-mandated minimum wage and poverty.

Cato’s Chris Edwards offers this synopsis:

He finds: “While alleviating poverty is a widely shared goal, raising the minimum wage is unlikely to achieve that end. In reality, it is more likely to result in making many low-skilled workers worse off. The minimum wage fails to reduce net poverty because of its adverse effects on employment and poor ability to target workers living in households below the poverty threshold.”

The literature finds substantial elasticities with respect to low-skilled workers, and Sabia notes that CBO used lower-bound figures in its recent study.

I was surprised to learn that so few people affected by the minimum wage live in poor households. Regarding the president’s current proposal, Sabia finds that “only 13 percent of workers who would be affected live in poor households, while nearly two-thirds live in households with incomes over twice the poverty line, and over 40 percent live in households with incomes over three times the poverty line.”

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