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How Effective Is the Minimum Wage at Supporting the Poor?

Thomas MaCurdy
Journal of Political Economy
Vol. 123, No. 2 (April 2015), pp. 497-545
DOI: 10.1086/679626
Stable URL: http://www.jstor.org/stable/10.1086/679626
Page Count: 49
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How Effective Is the Minimum Wage at Supporting the Poor?
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Abstract

This study investigates the antipoverty efficacy of minimum wage policies. Proponents of these policies contend that employment impacts are negligible and suggest that consumers pay for higher labor costs through imperceptible increases in goods prices. Adopting this empirical scenario, the analysis demonstrates that an increase in the national minimum wage produces a value-added tax effect on consumer prices that is more regressive than a typical state sales tax and allocates benefits as higher earnings nearly evenly across the income distribution. These income-transfer outcomes sharply contradict portraying an increase in the minimum wage as an antipoverty initiative.

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