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New Study: $10.10 Minimum Wage Could Lift Millions Out Of Poverty

Economy Memo Pad

New Study: $10.10 Minimum Wage Could Lift Millions Out Of Poverty


Raising the federal minimum wage to $10.10 per hour could directly lift nearly five million Americans out of poverty, according to a new study from University of Massachusetts-Amherst economist Arindrajit Dube.

According to Dube’s findings, a $10.10 per hour minimum wage — the same level proposed by a bill co-authored by Senator Tom Harkin (D-IA) and Rep. George Miller (D-CA), and supported by President Barack Obama — would reduce the poverty rate among the non-elderly population by 1.7 percent. Taking lagged effects into account, the minimum-wage hike could eventually reduce the poverty rate by 2.5 percent, lifting 6.8 million out of poverty.

“To put this in context, the poverty rate among the non-elderly rose by as much as 3.4 percentage points during the Great Recession,” Dube writes. “So the proposed minimum wage change can reverse at least half of that increase.”

Dube is not the first economist to illustrate the impact that a minimum wage hike could have on fighting poverty; as this chart from the Economic Policy Center makes clear, a raise to $10.10 per hour would lift minimum-wage income above the poverty line for a family of three for the first time in 46 years.

EPI chart

In addition to helping families in need, raising the minimum wage is also a potent political tool; polls have repeatedly found large majorities in favor of raising the minimum wage and tying it to inflation. Due to the proposal’s popularity, Democrats are expected to make increasing the minimum wage a central tenet of their 2014 election strategy.

H/t: Huffington Post

Henry Decker

Henry Decker was formerly the Managing Editor of The National Memo. He is currently an Online Associate at MRCampaigns.

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  1. 1olderbutwiser1 January 4, 2014

    To lift anyone out of poverty is a complicated question, more than be adequately addressed here . But first, look at what causes poverty. It’s not a low wage alone, albeit a starting wage must by nature be low, since employee value for an employer is normally enhanced by experience and expedience. People must be prepared to show a value of their work which profits their employer. That’s the essence of escaping poverty. Most squeaky wheels want to be coddled and rewarded for no additional effort, other than mundane physical labor, which by necessity makes them the low man on the totem pole. People in executive positions of knowledgeable authority of business operation are more limited in availability, since you just can’t compete in a competitive market with a boss for every worker. Those who are brighter may just start their own business to compete with the employer they feel were biased to their advancement, and in doing so will find great truth previously unforeseen by themselves. The higher a minimum wage goes, the higher the statistics are for consideration of being in poverty as the cost of living rises, and so to be sure, the employees of government doling out benefits for the impoverished will still be there acting as benefactors of a big brother vowing to level the playing field so to speak, and it can continue ad infinitum. Or so it seems. The reality is that in the end, all business will have been crippled to non-viability, all that is left are the benefactors and the printing press. In your heart, you know I am right. The cream rises to the top, AFTER the cow is milked. That’s life, accept it and improve yourself if you are poor and want better. If you are poor and simply want more for being poor,……..,what’s the point?

    1. atc333 January 4, 2014

      This particular viewpoint totally ignores the reality that minimum wage today has less than 70% of the buying power of minimum wage 20 years ago. Why do so many posting here rather see Federal, state, and local governments subsidizing Walmart, Target, and so many others though social programs, simply to maintain the low minimum wage? Why do you have no problems with the obscene salaries now being taken home by CEOs of corporations which pay minimum wage, and the massive redistributions of wealth which have occurred over the past few decades following the GOP’s “tax cuts creates jobs” of the Reagan, Bush I, and II Administrations? (over 40% more of all wealth of America redistributed since 1968 to the top 2%)back when they only owed 8% of that wealth) Why have GOP Administrations created less than half as many jobs as Democratic ones over the same period of time? Why does the GOP Right Wing, and apparently you, fail to realize that a strong middle and working class are the engines which drive the American economy, and keeping 47% of Americans living at, below, or just above the poverty level, and blaming them for their poverty only slowly destroys our economy? Why is it that the two cornerstones of the GOP economic theory, deregulation, and tax cuts for job creators, brought about the Bush II economic meltdown, and now, the Right Wing GOP, after three GOP Administrations have proven it to be a massive failure, want to try it all over again, desperately trying to convince the American Voters that “this time we will get it right”. How much wealth does the GOP need to see the top 2% accumulate before it will say “enough is enough”?

      1. 1olderbutwiser1 January 4, 2014

        I am going to respond to you tonight when I have more time to type, as I am a “two-finger pecker” You have a good argument which will take time to dispel (only) parts of..

        1. ralphkr January 4, 2014

          The trouble, olderbut, is that truth is so exceptionally hard to dispel…unless you are a dittohead of follower of FUBAR News in which case you have no conception of truth.

    2. disqus_fsqeoY3FsG January 4, 2014

      I agree there is a starting point and wages are based on what you bring to the table at the beginning. However as you remain with that employer you prove through hard work, ability to learn and your loyalty that your value has increased because your experience has increased. The the problem is for the last few decades employers have not been compensating most of their workers for their hard work, experience and loyalty. Trickle down economics has only been working for the top 6%. From the CBO over 3 decades the people at the very bottom of the earning scale wages have increased 16%, the top 5% 160% and the top 1% 281% . When the milk is sour there is not chance for the cream to rise to the top – it curdles, just like trickle down economics.

    3. Independent1 January 5, 2014

      “The higher a minimum wage goes, the higher the statistics are for consideration of being in povery as the cost of living rises blah blah blah…..” Where did you get this mindless nonsense??

      Do you even realize that the minimum wage in Europe is $12/hr and that with that minimum wage, the average McDonalds in Europe is more profitable than the average McDonalds in America that pays their employees $7.50-$8.00/hr.

      And guess why?? Most likely because, with Europe’s minimum wage of $12, customers coming into McDonalds, including the McDonald’s employees, can afford to order items from the Combo menu which is more profitable, than being forced like here in America, to buy items from what was the $1 menu.
      And do you realize that Elizabeth Warren during a congressional hearing on raising the minimum wage to $10.10 PROVED that McDonald’s would be able to easily afford that by just adding 4 cents (yup that’s 4 cents) to the price of JUST ONE combo meal. She used the example of raising the price of what is now a $7.15 combo meal to $7.19. McDonald’s has such a customer turnover that it can easily afford to pay it’s employees $10.10/hr by adding just 4 cents to one item. And how many items does McDonald’s sell 50? 100? maybe. So guess just how easy it would be for a store like WalMart that sells possibly 100,000 items to add maybe 2 or 3 cents to the price of maybe 100 items they sell, or maybe more, and easily be able to pay their employees $10.10/hr.

      And do you realize that even today, a WalMart competitor, Costco, actually pays it’s cashiers $15-$20/hour and it’s supervisors closer to $25; and on top of that Costco employs very few part timers; that vast majority of their employees get paid vacations, healthcare and pension plans. And on top of all that, Costco overall is more profitable than WalMart. Over the past 8 years, Costco stock is up around 1,000%, whereas WalMart and Target are only up between 400-500%.

      Paying workers poverty level wages is not something multi-nationals have to do to be profitable, it’s something they choose to do in their efforts toward keeping a large percentage of Americans as low on the peon totem pole as they can.

    4. m8lsem January 5, 2014

      The difficult factor to evaluate is simply this: the employee would not be an employee if the work being done by the employee were not necessary to the overall success of the enterprise. There is a sine qua non factor there.
      I reject as immoral any argument that easy replacement means lack of respect is justified. People are not commodities, they are living, breathing human beings with two legs, two arms, one brain — just like the Chief Executive Officer and the Chairman of the Board. The value of the work being done is hard to calculate, to be sure, but it needs doing. That figure is higher than the minimum wage.
      When an employee feels appreciated, the morale of the employee climbs, and the productivity as well.

    5. Sand_Cat January 8, 2014

      Where are you getting the actual evidence that “Most squeaky wheels want to be coddled and rewarded for no additional effort…”
      Yes, there are always some who take advantage of the system: I suspect that more of them than you care to admit are “conservatives” who feel justified in ripping off a system they assume is being ripped off by the other political side. But I have no evidence, and I suspect you have none for your far more sweeping statement, which sounds suspiciously like the standard GOP party, also asserted with zero supporting evidence. I guess it also turns on how you define “squeaky wheels.” I’m betting anyone who thinks he – or especially, she – should earn more – excepting the wealthy, of course – is a lazy, unworthy freeloader, i.e., squeaky wheel, to you.

      1. 1olderbutwiser1 January 9, 2014

        You need to have your own business in a competitive environment, and make payroll. It would be an eye-opener for you. I refer to squeaky wheels as those who want more in payment for same or reduced output, where doing such flies in the face of successful business. Most squeaky wheels as per my experience in life are ones who feel anyone making a profit off their efforts, should be castigated as an ogre; while they have no incentive to be self-employed, so as to be able to lay their entire level of responsibility in life at the foot of the one who employs them for 30 or 40 hours a week. Spend 1/4 of the time they live working, and have the one they work for, pay them enough compensation to keep them, their spouse, their children, all the food, shelter, clothing, cars, vacation homes, college for all the kids, etc.,etc. You seem to think this is practical? Make payroll sometime, see how fast you change your mind.

        1. Sand_Cat January 9, 2014

          Maybe working for someone who assumes workers who aren’t paid enough to live are trying to cheat him has some effect on willingness to produce.

  2. mikem42 January 4, 2014

    Corporations in this country could do so much towards making it better, for themselves as well as the working class. A little less profit wouldn’t hurt them, and it would go a long way in lifting the buying power of millions. How doesn’t that help everyone? Automation and outsourcing has greatly limited jobs for millions, and something has to be done to change the model.

    1. m8lsem January 5, 2014

      Agreed. A little less profit … when the boys at the top each get salaries and benefits that aggregate to a number to the left of the second comma, any argument that the company cannot instead afford higher wages for the working stiffs who enable the company to exist is pure horse-pucky. When the brass is taking home numbers to the left of the third comma, as with Koch industries, the mass of employees should be above the poverty line and well into middle class.

  3. Allan Richardson January 4, 2014

    It’s not only moral, it’s good for the economy. With a higher income, the WalMart greeter could order a bigger meal at Waffle House and tip the waiter/waitress more, and the Waffle House server could spend more at WalMart. This is a POSITIVE feedback loop, rather than the feedback loop we have now (the reason WalMart sells so much is, to a large extent, that fewer workers can afford to shop for better quality but higher priced items elsewhere, because workers are making less than in the past). Reverse the feedback loop and eventually both of these examples could move on to higher paying jobs, because they and their peers would have CREATED those jobs.

    The only time so-called “job creators” create jobs is when demand increases to the point that they need more people (AND more equipment and parts/ingredients, which increases demand in some other company) to produce more. And demand is created by middle/lower income workers having more to spend. So the middle and working class are the REAL JOB CREATORS.

  4. RobertCHastings January 4, 2014

    And that would NOT entail all those $100,000per year jobs that are out there for everyone, according to so many conservatives. I mean, $10 / hour is just $20,000 per year, if you work forty hour weeks with two weeks of vacation, personal, sick, and holiday time. Unfortunately, the operative term in that statement is “forty hour weeks”. In order to avoid paying benefits, like health insurance, many employers do NOT take on full-time employees, but that is another issue.

    1. ralphkr January 4, 2014

      And, Robert, having people work fewer hours a week to avoid benefits is not a new thing. I remember when my wife spent months in the hospital 30 plus years ago that almost all of the nurses were ‘Temps’ and only 2 or 3 nurses per floor were full time employees.

      1. RobertCHastings January 5, 2014

        Our son just spent 29 days in the hospital, and we observed the same problem. The days the nurses work are 12-hour shifts, but they only work three days. Those fortunate enough to get an 8-hour shift generally work 4 days a week. And, as you say, this keeps them from qualifying for benefits..

        1. ralphkr January 5, 2014

          Obviously, I was not clear in my post. When I said that the majority of the nurses were ‘Temps’ I meant that they did not work for the hospital but worked for an agency that supplied employees to various entities. Interestingly enough, the ‘Temps’ were paid more than full time employees and their agency had better benefits (profit sharing, cheaper insurance) than the hospital had for full time employees.

          1. RobertCHastings January 5, 2014

            Two different situations, but basically the same issues. I have worked for a tempt agency that offered insurance and I thank God I did not have to resort to using it. Yes, it was cheap, but in insurance you get what you pay for. What saved my but was Obama in 2009 getting the federal government involved in paying 65% of my COBRA premiums after being laid off, just like they paid 65% of my weekly wages with Unemployment.
            You are opening up a whole new can of worms with the Temp thing. Many companies, after the big layoffs of 2007-2009, hired some of their skilled laid-off employees as temps and put them in the same jobs, with no benefits, expecting the same level of performance as the full-time employees.

  5. Dominick Vila January 5, 2014

    The idea that increasing disposable income in a consumer oriented economy is detrimental to the economy does not make sense. The minimum wage must be increased to ensure all Americans earn livable wages…and to help boost the weak economy we still have. I agree with those who believe $15 an hour is too much, however, that is only true if we look at the nation as a whole instead of the circumstances that prevail at a state level. $15 an hour is too much in states like Texas, Alabama, Florida, and Mississippi for example; but it is barely enough to survive in states like California and New York. In addition to ensuring livable wages are paid, a new system must be developed that takes into consideration cost of living, at a state level, and demographics. The current minimum wage is an embarrassment and should have been changed long ago.

    1. sigrid28 January 5, 2014

      What I also find appealing about a minimum wage that fluctuates with the cost of living is that the decision to raise or lower this guideline would be taken out of the hands (and minds) of politicians and placed in the realm of statistics, where–it is to be fervently hoped–we all have the same facts. This also goes for tying the length and amount of unemployment insurance to unemployment statistics. I’d be OK with these guidelines being set federally (perhaps by the NLRB using widely accepted government statistics) but fine-tuned on a state-by-state basis, so local courts can adjudicate violators, a process that will be faster than adjudication by the federal courts and therefore more effective. Legal remedies may be rather swift given the expertise within our legal system of great many attorneys who specialize in piecing together class actions law suits. They will be needed to give laws demanding fairness in hiring and firing the teeth to succeed long enough to make a difference to the overall economy. The job creators within the top 2% will not part with a dime unless they are forced to do so.

    2. daniel bostdorf January 5, 2014

      I disagree that $15 an hour is too high. see above total comment. Respect your view. But we need to throw out current social programs and minimum wage.

  6. daniel bostdorf January 5, 2014

    I disagree that $15 an hour is too high.

    $15/hour is $420 a week 28 hours part time. $21840 yearly . Still poverty level.
    $15/hour full time is $600 a week/ $31200 yearly. Still near or at poverty if you consider family size.

    Federal poverty guidelines here:

    In fact, I believe the “minimum wage or livable wage” should be replaced with a guaranteed yearly income based upon Federal poverty statistics by state.

    This idea is not new. Back in 1967 Dr. Martin Luther King and highly respected economists proposed this a s a way to eliminate poverty once and for all.

    Outlined here:

    “Rev. Dr. King viewed the guaranteed income as the way to abolish poverty. It does have that effect, but when prRev. Dr. King viewed the guaranteed income as the way to abolish poverty. It does have that effect, but when properly funded (not touching earned income) and properly distributed (to all people), it becomes more than that — it can be a fundamental instrument of economic justice.operly funded (not touching earned income) and properly distributed (to all people), it becomes more than that — it can be a fundamental instrument of economic justice.”

    A guaranteed annual out of poverty level annual income would eliminate all antiquated social programs and nearly all entitlements. It would make this country the leader in eliminating poverty once and for all. In addition, We need livable affordable housing, and a justice system free from big money.

    “Overcoming poverty is not a task of charity, it is an act of justice. Like Slavery and Apartheid, poverty is not natural. It is man-made and it can be overcome and eradicated by the actions of human beings. Sometimes it falls on a generation to be great. YOU can be that great generation. Let your greatness blossom.” ……Nelson Mandela

  7. starrbux January 7, 2014

    To justify and wield arbitrary power, those who preach from collectivism’s altar often attempt to hijack democracy’s ideal by claiming that majority rule is absolute.

    1. Sand_Cat January 8, 2014

      More like those conservatives who whine about court decisions that protect minority rights than those of us you obviously consider “collectivists.”
      Wrong on the facts, and miles off topic, jackass!


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