Increasing the minimum wage is often suggested as a means of moving people from welfare to work.

Higher wages, in theory, should give people a greater incentive to work. However, the evidence suggests that under the present welfare system, raising the minimum wage would not lead more people to leave welfare for work.

Even at $4.25 an hour, getting a minimum-wage job greatly increases the resources available to a family. For example, a study of welfare in California found:

• A single mother with two children and no job can receive approximately $11,600 of welfare benefits through Aid to Families with Dependent Children (AFDC), Medicaid and food stamps.

• If she got a full-time minimum wage job paying $8,800 yearly, she would also be eligible for a subsidy of $2,900, via the Earned Income Tax Credit (EITC), for total income due to employment of $11,700.

• In addition, she would still be eligible for some welfare benefits, and the combined value of wages and benefits would be nearly $22,000.

Thus beginning full-time low-wage work could almost double her family's overall resources. Although welfare benefits in California are higher than in most states, the same incentives exist elsewhere. Yet nationwide, only 7 percent of all parents now receiving AFDC work and only 3 percent work full time.

Furthermore, raising the minimum wage from $4.25 to $5.15 would actually reduce the total resources available to a working welfare family. Because welfare benefits and the EITC are reduced as earnings rise, a single parent with two children would actually experience a 2 percent reduction in total resources.

Source: Carlos Bonilla, "Welfare and Work: The Value of Low-Wage Employment," December 1995, Employment Policies Institute Foundation, 607 14th Street, NW, Suite 1110, Washington, DC 20005, (202) 347-5178.