The Evidence

• Addison and Blackburn study based on state level panel data. Regress the poverty rate on wages, state specific effects, and other fixed effects.
  

  Table 1: Wage - Poverty Elasticities for the 1990's

  Population Segment	Poverty / Wage Elasticity
  Teenagers	$-0.50$
  Young Adults	$-0.28$
  Junior High Dropouts	$-0.50$
  3 Groups Combined	$-0.36$

  
  
• 1980's: no statistically significant effect on the reduction in the poverty level following a minimum wage increase.
  • Tight labor market in the 1990's?
• UK data measures the impact of the minimum wage on household earnings by income decile.
  

  Table 2: Minimum Wage Impact by Income Decile

  Decile	% Whose Earning Rise
  Poorest	$3.5\%$
  2nd	$6.6\%$
  3rd	$7.4\%$
  4th	$8.4\%$
  5th	$9.0\%$
  6th	$9.5\%$
  7th	$7.7\%$
  8th	$6.7\%$
  9th	$3.1\%$
  Richest	$1.9\%$

  
  
• The UK wage council's 1993 Trade Union Reform and Employment Rights Bill abolishes the minimum wage in the UK.
• Neumark and Wascher measure the impact of the minimum wage on the probability of being poor.
  • Eliminates impact of firms responding by cutting back on hours or fringe benefits.
  
  

  Table 3: Probabilities of Making the Transition Into and Out of Poverty

  		Wage Increase		No Increase		Difference
  	Year 1	Poor	Non-Poor	Poor	Non-Poor	Poor	Non-Poor
  Year 2
  Poor		0.655	0.066	0.634	0.062	0.022	0.004

  
  
• Familiar Card and Krueger study