University of Wisconsin–Madison
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Boosting the poverty-fighting effects of the minimum wage

In the past five years, there has been a large increase in the number of states, counties, and cities that have established minimum wage laws that exceed the federal minimum wage of $7.25 per hour. Although many of these minimum wage laws explicitly state an intention to reduce poverty, the effects of minimum wage increases to date on poverty rates appear to be small at best. In order to make the minimum wage a more effective poverty-reduction tool, we recommend raising the federal minimum wage to $12.00 per hour, and using employer tax credits to offset any disemployment effects of the higher wage. Since this plan would increase tax revenue without increasing administrative costs, we recommend using the additional funds to allow minimum wage workers to continue to benefit from public income supports at higher income levels in order to “make work pay,” and remove barriers to upward mobility.

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Economic Support, Employment, Financial Security, Labor Market, Low-Wage Work, Social Insurance Programs

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