Do Minimum Wage Increases Really Reduce Public Assistance Receipt?

Thanh Tam Nguyen, San Diego State University
Joseph J. Sabia , San Diego State University

Advocates of minimum wage increases claim that an unintended benefit of such hikes is a reduction in means-tested public program participation. Using three decades of data from the Current Population Survey, the Survey of Income and Program Participation (SIPP), and the National Income and Product Accounts (NIPA), this study comprehensively examines the effect of minimum wage increases on five large means-tested public programs. We conclude that recent evidence in support of minimum wage-induced declines in public assistance is based on empirical models that conflate minimum wage effects with effects of the state business cycle and fail falsification tests. Results from more credible specifications show that minimum wage increases are largely ineffective at reducing net program participation. Our findings are more consistent with minimum wage-induced income redistribution whereby minimum wages decrease the probability of welfare take-up for some low-skilled individuals, but decreases the probability of welfare exit for others.

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 Presented in Session 8. Economy, Labor Force, Education, & Inequality