Study: Minimum wage hike won't help working poor

By Susan Lang

On July 29, Gov. George Pataki vetoed a bill that would have increased New York state's minimum wage. One of the reasons he cited was a study by Cornell economists Richard V. Burkhauser and Joseph J. Sabia. The governor's press release on the veto stated, "According to a study conducted by economists from Cornell University, a raise in the minimum wage to $7.10 per hour would cost New York State approximately $880 million in increased prices New Yorkers will have to pay to sustain the higher wages."

Burkhauser

"We also found that the vast majority of New York workers who would gain from raising the New York State minimum wage to $7.15 per hour are not poor and that the majority of the working poor in New York would not be helped by such an increase," said Burkhauser, the Sarah Gibson Blanding Professor and chair of the Department of Policy Analysis and Management at Cornell. He added that more than 83 percent of minimum-wage benefits go to teenagers and other workers living in families above the poverty line, the majority of whom live in middle-class families far above the poverty line.

"Minimum-wage policies should be abandoned and placed in the museum of antiquated policies," commented Burkhauser, who also wrote an op-ed on the same topic that was published in The New York Times July 18. "New York is a leader in the use of a state supplement to the federal Earned Income Tax Credits (EITC), which is a much more effective way to target the working poor. For instance, for every dollar in wages a low-income family with two children earns in New York, the federal government provides a tax credit of 40 cents and New York adds 12 cents to that credit. This boosts the minimum wage rate from $5.15 to $7.83 per hour for such low-income workers. And because it's government supported, the labor force doesn't lose jobs as it does when the minimum wage goes up."

Co-author Sabia assisted Burkhauser while a graduate student at Cornell. He is joining Abt Associates Inc. as an economic analyst this month.