Minimum Wage Hikes Part III: Minimum Wages and Federal Assistance
Continuing the thoughts from the post I had on Valentine’s Day, I wanted to address a few of the questions I received surrounding the proposed hike to the federal minimum wage. During his State of the Union speech, President Obama stated that a full-time worker earning the current federal minimum wage of $7.25 per hour would fall below the poverty line. So the question popped up, what’s the relationship between low-wage workers and those who require government assistance?
Well, I was able to track down some research through the Office of The Assistant Secretary for Planning and Evaluation (that’s in the U.S. Department of Health & Human Services), and it paints an interesting picture.
The first thing to realize is that not everyone earning around the minimum wage is in dire economic straits. One brief from the ASPE categorizes “low-wage workers” as those making less than $10.50/hour in 2008 and less than $8.63/hour in 2001. They found that less than half (44%) of low-wage workers lived in low-income families, and only 26% lived in low income families with children. The majority of low-wage workers live in families that don’t require government assistance. A more detailed paper from ASPE found that – at least as of January 2001 –4.8% of low-wage workers received TANF (Temporary Assistance for Needy Families) payments. Similarly, 15.2% of low-wage workers are on food stamps, and 17% have child-care assistance. The biggest area of government assistance is the earned-income tax credit, a refundable tax credit for low- and middle-income earners. In 2001, 58.6% of all low-wage earners were eligible for the EITC. Interestingly, some opponents of increasing the federal minimum wage have jumped on board with the idea of increasing the EITC instead.
So, the data seem to show that it is only a minority of those who earn around the minimum wage that require federal assistance. That said, relative to overall population, low-wage workers are more likely to be on public assistance. And once you look at at-risk populations like low-wage unmarried mothers, public assistance increases markedly – food stamp usage is 32% for this group compared 15.2% for all low wage workers. In addition, working families make up a large share of the families relying on public assistance. For example, 53.1% of California families on public assistance are working. So, changes in the minimum wage and changes in wages at the bottom could have implications on public assistance enrollment.