Working paper no. 1995-24
As the effects of minimum wages on welfare exits and employment of welfare mothers is unknown, this study examined those effects using data from the Survey of Income and Program Participation. It found that higher minimum wage levels and hikes in those levels slowed AFDC exit rates. Analyses of work effort and duration of employment among working welfare mothers yielded similar results. Among all working welfare mothers, those working in states with higher minimum wages or working in states that increased them worked fewer hours and worked shorter periods of time. Results suggest that raising the minimum wage will not reduce welfare dependency by making work pay. Indeed, the disemployment effect resulting from minimum wage hikes impedes policies aimed at reducing welfare dependency through work. As an anti-poverty device, the minimum wage, on its own, is ineffective and outdated.