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Stevenson Center, minimum wage, poverty


With the recent increase in the Federal minimum wage, it is important to consider the impact of minimum wage in order to assess its effectiveness as a poverty reducing measure. While an increase in the minimum wage will increase income, the increased labor cost may cause an increase in unemployment. Greater unemployment may negate any benefit derived from the change in the minimum wage. Also, the minimum wage could put upward pressure on all wages. By using data from the Census and Bureau of Labor and Statistic’s 2006 March Supplement, it is possible to develop a model that empirically tests the impact of the minimum wage on income. The minimum wage increases the income for most households; one must consider the intent of Fair Labor Standards Act. By examining households close to the poverty line, one can conclude that an increase in minimum wage does not benefit the poor. Ultimately, an increase in minimum wage falls short as an effective measure in reducing poverty.

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