Primer: Minimum Wage and Combating Poverty | Research | American Action Forum

Primer: Minimum Wage and Combating Poverty | Research | American Action Forum

An analysis of data from the 2012 Current Population Survey (CPS) March Annual Social and Economic (ASEC) Supplement, which reports information from 2011, reveals that very few people earn the minimum wage. In 2011, 58.9 percent of all wage and salary workers were paid hourly rates. Of those, only 3.2 percent earned at or below the minimum wage of $7.25 per hour. When looking at all wage and salary workers, minimum wage workers accounted for a mere 1.9 percent.

Looking specifically at how minimum wage relates to poverty, only 0.3 percent of people in families with incomes below the relevant 2011 federal poverty lines worked an hourly job and made at or below the minimum wage. The minimum wage does not help people in poverty who actually work. When examining the working poor, only 7.8 percent of all hourly-paid workers in poverty earn at or below the minimum wage (6.3 percent of all wage and salary workers in poverty).

In 2011, only 1.2 percent of people in families with incomes below the federal poverty threshold earned an hourly wage at or below $9 per hour and only 1.5 percent earned a wage at or below $10.10 per hour. Even among all those who work and are in poverty, only 28.5 percent earn at or below $9 per hour and 36.2 percent earn at or below $10.10 per hour. These figures suggest that increases in minimum wage to $9 and $10.10 not only would fail to assist almost 99 percent of all people in poverty, but they would also neglect the vast majority of people in poverty who are actually working.

Since so few working people in poverty actually earn at or near the federal minimum wage, very few would benefit from a minimum wage increase. Sabia and Burkhauser (2010) found no statistical evidence that the minimum wage increases between 2003 and 2007 affected state poverty rates. Only 15.5 percent of the net benefits from the federal minimum wage increase to $7.25 went to workers living in poverty. If the minimum wage were to increase to $9.50 per hour, only 10.5 percent of the net benefits would go to workers in poverty.