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Placing a minimum wage that is high seems like a natural method to help lift families out of poverty. Minimum salary target individual workers with low wages, rather than families with low incomes. As a result, a large share of the greater income from salary flows to higher-income families. Raising the minimum wage has become a popular proposal to fight rising inequality and poverty in the USA.

Since the last federal minimum wage increase in 2009 to $7.25 per hour, 23 states have increased their minimums above the federal level, and many cities have place or are considering minimal salary as large as $15 per hour.

A high minimum wage lowers the inequality of wages earned by workers. One working adult with two children earning the federal minimum wage of $7.25 and working full-time generates about $14, 500 annually, well below the U.S. Poverty threshold of $19, 073 for a family of this size. Numbers such as these frequently underlie arguments to increase the minimum wage, citing either the hardship along with the unfairness of a full-time worker earning "Below poverty" salary. Deciding whether this is the most effective tool is a great deal more complex because minimum salary address low-wage work, whereas poverty is based on household income.

One complication is research pointing to job declines at wage increases, which means increasing wages for some individuals must be weighed against potential job losses for others. If we consider increasing the minimum wage higher, for example, to $12, only 15 percent of the benefits go to poor families, because other higher-wage workers who would benefit are inclined to be poor. With a $15 minimum wage the corresponding amounts will be 12% and 38%. This evidence-coupled with the simple fact that companies who would cover the higher commission are not necessarily people with the greatest incomes, but instead may be owners of small businesses with low profit margins-indicates that minimum wages are a very imprecise method to increase the relative incomes of the lowest-income families.

The ineffective targeting of families does not imply that high minimum wages do not, on net, help the bad. Economists have studied how poverty levels vary in nations where the minimum wage is significantly increased versus states with no increase. Even though there are isolated exceptions in both directions, the general conclusion from this literature is that there is no statistically significant relationship between increasing the minimum wage and also decreasing poverty. The efficiency of the minimal wage in reaching its intended target has crept up in the past decade, as a by-product of the unfortunate declines in earnings among near-poor minimal wage workers.

The evidence simply does not supply a strong case for utilizing minimal salary to decrease poverty. Considering that the EITC enlarged considerably in the mid-1990 s, the real value of the minimum wage has diminishednevertheless, the real value offered by the two policies combined for families with kids now surpasses what the minimum wage alone used to provide. As might be expected, the EITC has proven effective at reducing poverty than the minimal wage. This evidence, coupled with what we know about minimal wages, indicates that the EITC is a policy to combat poverty. In particular, consolidating a minimum wage and a EITC leads to larger poverty reductions for unmarried women with kids.

Figure 2 demonstrates that at the typical minimum wage, a 10% greater EITC phase-in speed leads to an estimated 1.6 percentage point decrease in poverty. Because minimal salary concentrate on non worker wages and not household incomes-and because these two conditions are only weakly related-the targeting of salary is imprecise: Few of the benefits are more likely to flow to poor families, and some go to quite high-income families. Perhaps reflecting this issue, there is minimal evidence that high minimum salary alone decrease poverty or dependence on government plans. Policymakers are likely to do a much better job combating poverty by creating the EITC more ample than simply increasing the minimum wage.

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