Lifting Low-Wage Workers Out of Poverty: An Analysis of Washington State’s Higher Minimum Wage

• In Event: 189 - Regular Session. Poverty

Abstract

Does a higher minimum wage decrease poverty and income inadequacy? This paper presents research that explores this question using ACS data for Washington State. Given that Washington has the highest statewide minimum wage in the country, it is the best “test” case of whether a higher minimum wage can counteract negative wage trends in the labor market. Two types of analysis are done: the first describes minimum wage workers in Washington State, including workers indirectly affected (those with wages near but above the minimum wage), developing a profile of their characteristics (race/ethnicity, age, gender, etc.), and comparing them to higher-wage workers. Second, we reduce the earnings of minimum wage workers to the federal minimum wage, and examine the impact on household well-being, using the federal poverty measure and the Self-Sufficiency Standard. (The latter is a basic needs budget that reflects variation in family composition and geographic variation in the cost of living.) The findings provide a detailed picture of minimum wage workers, and also reveal the limitations of the federal poverty measure to adequately assess income adequacy and the impact of measures like the minimum wage to alleviate “working poverty”. As with other studies, we find minimal impact using the federal poverty measure; this contrasts with the much larger impact of the higher minimum wage on the Standard, thus demonstrating that the low “poverty” impact is more an artifact of the measure used.

Author

• Diana M. Pearce, University of Washington