Increasing the Minimum Wage: California’s Winners and Losers

As a policy tool, minimum wage increases rely heavily on two assumptions: that such increases help the poor and impose little public or social cost.  In Increasing the Minimum Wage: California’s Winners and Losers, Margaret O-Brien-Strain and Thomas MaCurdy test both assumptions by modeling the effects of the 1996 federal increase from $4.25 to $5.15 per hour.  Noting that low-income families receive a relatively small portion of the additional earnings and that higher labor costs put upward pressure on the prices of products these families buy, the authors conclude that minimum wage increases do not help poor families as much as more targeted policy options.