Report: Raising Minimum Wage Would Reduce Public Assistance Spending

A report recently issued by Economic Policy Institute, entitled Balancing Paychecks and Public Assistance: How Higher Wages Would Strengthen What Government Can Do, finds that raising the federal minimum wage to $12 per hour by 2020 would reduce public assistance expenditures by $17 billion annually. Key findings include:

  • Most recipients of public assistance work or have a family member who works.
  • Among families or individuals receiving public assistance, the majority (66.6 percent) work or are in working families (families in which at least one adult in the household works). This number grows to 71.6 percent when focusing on non-elderly recipient families and individuals (those under age 65).
  • About 69.2 percent of all public assistance benefits received by non-elderly families or individuals go to those who work.
  • Nearly half (46.9 percent) of all working recipients of public assistance work full time (at least 1,990 hours per year).
  • Working recipients of public assistance are concentrated at the bottom of the wage scale and in low-paying industries.
  • Roughly 60 percent of all workers in the bottom decile of wage earners (those paid less than $7.42 per hour) receive some form of government-provided assistance, either directly or through a family member. Similarly, over half (52.6 percent) of workers in the second decile of wage earners (those paid between $7.42 and $9.91 per hour) receive public assistance.
  • Workers in the arts, entertainment, recreation, accommodation, food services, and retail trade industries are disproportionately represented among public assistance recipients. Workers in these industries receive even more disproportionate shares of program benefits, underscoring the particularly low wages in these industries.

The report estimates that a $1 wage increase for workers earning less than $12.16 per hour would reduce the percentage of workers receiving public assistance in this wage group by 3.1 percentage points, or by more than 845,000 workers. The report also estimated that the average worker in this income group would see a wage increase of $3.16 per hour, if the federal minimum wage was increased to $12, reducing the number of these workers receiving public assistance by 2.7 million people.