Minimum Wages, Cash Wages, and Poverty: New Evidence from the Great Recession Years

Joseph J. Sabia, San Diego State University
Richard V. Burkhauser, Cornell University

This study is the first to examine whether the poverty effects of minimum wage increases differ across the business cycle and to explore the effect of increases in minimum cash wages paid to tipped workers on poverty rates. Using data drawn from the March 2004 to March 2012 Current Population Survey, we find no evidence that minimum wage increases reduce poverty rates among all individuals, workers, or individuals without a high school diploma either during times of economic expansion or recession. Across the business cycle, we find little evidence that the minimum wage is well-targeted to those in need. When we examine the effect of increases in minimum cash wages, we find that such increase may actually increase poverty rates of those without a high school diploma. This finding is consistent with adverse employment effects of cash wage hikes for restaurant employees.