| BUSINESSWEEK ONLINE : DECEMBER 6, 1999 ISSUE | ||||||||
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| ECONOMIC TRENDS
Incentive for Welfare Moms How minimum-wage hikes can help With unemployment at a 30-year low and Americans enjoying the fruits of a buoyant economy, it's hard to argue against the proposed increase in the minimum wage from $5.15 to $6.15 an hour. Indeed, the only issue dividing Democrats and Republicans is whether to do it over two years or three. Still, many economists and businesspeople continue to oppose the move and warn of its possible impact on the success of welfare reform. Standard economic theory indicates that a higher minimum acts to reduce employment among low-skilled workers. Thus, critics claim that it will actually tend to increase welfare rolls. Others argue that the lure of higher wages will lead welfare moms to get off the dole. Even if employment opportunities decline a bit, they say, more welfare mothers will compete for--and get--the jobs that are still available. A recent study by economist Mark Turner of the Urban Institute supports the latter view. The study analyzed the reactions of welfare recipients to minimum-wage hikes by the federal government and several states in the early 1990s, a period when unemployment was still relatively high. Turner's analysis indicates that a 50 cents rise in the minimum wage induces about 2.5% of recipients to quit the dole. By that measure, the proposed $1 hike could cut welfare rolls by as much as 5%. In sum, fears that planned hikes in the minimum will impede welfare moms' transition to work seem exaggerated. By GENE KORETZ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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