NCPA - National Center for Policy Analysis

NBER Study: Benefits To Some At The Expense Of Others

January 1, 1998

Boosting the minimum wage may raise some families' income above the poverty line, but push income below the poverty line for others, say economists David Neumark and William Wascher.

Looking at increases in the minimum wage between 1986 and 1995, researchers found that over a one-to-two-year period:

  • Poor families who benefit from an increase in the minimum wage do so because the higher wage raises earnings per worker in families whose members worked both before and after the increase.
  • However, increasing the minimum wage lowers the average number of workers per family among previously near-poor families.
  • Thus researchers conclude that the net effect of a minimum wage increase is a 1/2 to 1 percentage point increase in the proportion of families who are poor.
  • Furthermore, they say that because some families gain and some lose, minimum wage increases "more closely resemble income redistribution among low-income families than income redistribution from high- to low-wage families."

Minimum wage increases lower the average number of workers per family due to "disemployment effects" -- either because a family member loses a job or is unable to find a job they might otherwise have found.

Source: David R. Francis, "Minimum Wages Redistribute Income Among Low-Income Families," NBER Digest, January 1998, National Bureau of Economic Research, 1050 Massachusetts Avenue, Cambridge, Mass. 02138, (617) 868-3900.


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