REPORT: Study reveals 3 initiatives that actually increase poverty in poor neighborhoods
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A new study from a prominent researcher finds that higher minimum wages have increased poverty in poor neighborhoods, a finding that could shake up the debate over the federal wage floor and slow the liberal push for a $15-an-hour minimum.
The study, led by the University of California, Irvine economist David Neumark and published by the business-backed Employment Policies Institute, finds that, over the course of decades, higher minimum wages don’t reduce poverty in disadvantaged neighborhoods. Rather, the analysis finds that a $1 increase in the minimum wage raises poverty rates and government dependency by about 3 percent.
The report also finds evidence that cash welfare fails to lower poverty.
“The clear evidence here is that the minimum wage doesn’t deliver long-run gains and welfare doesn’t deliver long-run gains,” Neumark said.
The article goes on to state the following:
Still, the study weighs against the argument that a higher minimum wage would cut poverty or lessen dependence on public assistance.
It found similar results for cash welfare.
The study also reviewed a third federal initiative: the Earned Income Tax Credit that effectively subsidizes work, giving low-income earners a refundable tax credit. The study did not find evidence that the EITC lowered poverty over the long run, although that finding depended on the exact specification of the model used. In Neumark’s other research, he has found strong positive effects of the tax credit.
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