Supporters argue that a higher minimum wage is an effective anti-poverty tool. If businesses must pay their low-wage employees more, then those workers should earn more and fewer of them should live in poverty. Common sense says a higher minimum wage should fight poverty.
The facts, however, show otherwise. Many economists have examined the evidence and come to the surprising conclusion that the minimum wage does not reduce poverty. Ohio University economists Richard Vedder and Lowell Gallaway examined the effect that increases in the minimum wage had on the overall poverty rate in the United States and on the poverty rates for groups like minorities and teenagers that might especially benefit from higher minimum wages.
[1] They found that the minimum wage had no statistically detectable effect on poverty rates.
[1] See Richard K. Vedder and Lowell E. Gallaway, "Does the Minimum Wage Reduce Poverty?" Employment Policies Institute, June 2001, at
www.epionline.org/studies/vedder_06-2001.pdf(December 28, 2006).
Raising the Minimum Wage Will Not Reduce Poverty