Two mechanisms for boosting the incomes of low-income Americans have received heightened attention: raising the minimum wage or expanding the earned income tax credit (EITC). At AEI on Monday, a diverse panel of experts weighed the costs, benefits, and viability of these proposed solutions.
MDRC’s Gordon Berlin described how the EITC imposes substantial marriage penalties and provides very little support to single workers or single noncustodial parents. He expressed hope that proposals to expand benefits to singles would be considered at the federal level, but noted that the $35 billion cost could hinder adoption.
Heidi Shierholz of the Economic Policy Institute discussed the recent Congressional Budget Office (CBO) report examining the income and employment impacts of raising the minimum wage to either $9.00 or $10.10 per hour. She highlighted the substantial income boost many low-income and middle-class households would receive from the hike, but took issue with estimates suggesting that raising the minimum wage to $10.10 would cause an employment decline of 500,000 jobs.
San Diego State University’s Joseph Sabia noted that less than 16 percent of those who would benefit from raising the minimum wage live in poor households, and that more than two-thirds live in households with incomes greater than two times the poverty line. Overwhelmingly, argued Sabia, those who benefit from raising the minimum wage are neither poor nor nearly poor. The EITC is much better targeted to combatting poverty because it is tied to household income.
Harry Holzer of Georgetown University split the difference between Sabia and Shierholz, noting that raising the minimum wage — especially to $10.10 per hour — is risky in a struggling economy: it may decrease jobs more than we may be willing to accept. He supported raising the minimum wage more modestly — to $9.00 per hour — while also enhancing the EITC. However, Holzer expressed skepticism that such a proposal would gain traction on Capitol Hill in an era of tight budgets.
The US poverty rate has risen to 15 percent, and more than 46.5 million Americans are living below the poverty line. In a slow-growth economy, low-income Americans are still struggling 56 months after the Great Recession technically ended.
In his State of the Union speech, President Obama said he would raise the minimum wage for federal contractors and called on Congress to raise the federal minimum wage. Others have offered an alternative policy change: enhancing the earned income tax credit.
Which solution would do a better job of helping the poor? What impacts would each have on businesses and the economy generally? And what are their implications for the federal budget? Join AEI for a timely debate of these key questions among a diverse group of experts.
If you are unable to attend, we welcome you to watch the event live on this page. Full video will be posted within 24 hours.
Registration and Lunch
Robert Doar, AEI
Gordon Berlin, MDRC
Harry Holzer, Georgetown University
Joseph J. Sabia, San Diego State University
Heidi Shierholz, Economic Policy Institute
Robert Doar, AEI
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Gordon Berlin is the president of MDRC, a leading demonstration and evaluation organization dedicated to reliably learning what works in education and social policy. Previously Berlin was executive deputy administrator for management, budget, and policy at the New York City Human Resources Administration. He also served at the Ford Foundation’s Urban Poverty Program and at the US Department of Labor. Berlin has developed and managed programs to address problems associated with welfare dependency, homelessness, teenage pregnancy, early-childhood development, poverty, school dropout and youth unemployment, and other issues concerning low-income families and communities. He founded and served as the executive director of the Social Research and Demonstration Corporation, a Canadian nonprofit formed to test innovative employment-focused programs. Berlin has authored numerous publications on employment, education, poverty, and social welfare issues.
Robert Doar is the Morgridge Fellow in Poverty Studies at AEI where he studies and evaluates how free enterprise and improved federal policies and programs can reduce poverty and provide opportunities for vulnerable Americans. Before joining AEI, Doar was commissioner of New York City’s Human Resources Administration where he administered 12 public assistance programs for the largest local social services agency in the United States. Programs included welfare, food assistance, public health insurance, home care for the elderly and disabled, energy assistance, child support enforcement services, adult protective services and domestic violence assistance, and help for people living with HIV/AIDS. Before joining the Bloomberg administration, Doar was New York State commissioner of social services, helping make New York a model for the implementation of welfare reform.
Harry Holzer is a professor of public policy at Georgetown University. During the Clinton administration, Holzer served as the chief economist for the US Department of Labor. He served as associate dean of the Georgetown Public Policy Institute from 2004 to 2006 and was acting dean in fall 2006. He is also currently a senior research fellow at the American Institutes for Research, a senior affiliate at the Urban Institute, a senior affiliate of the National Poverty Center at the University of Michigan, a national fellow of the Program on Inequality and Social Policy at Harvard University, a nonresident senior fellow at the Brookings Institution, and a research affiliate of the Institute for Research on Poverty at the University of Wisconsin at Madison. He is also a faculty director of the Georgetown Center on Poverty, Inequality and Public Policy.
Joseph J. Sabia is an associate professor of economics at San Diego State University. He has published widely on the employment and poverty effects of minimum wages, the human capital effects of risky health behaviors, and sexual orientation–based discrimination in the labor market. His work has appeared in journals such as Industrial and Labor Relations Review, the American Economic Review, the Journal of Human Resources, the National Tax Journal, and the Journal of Health Economics. Sabia’s 2010 article with Richard Burkhauser on minimum wages and poverty won the Georgescu-Roegen Prize for article of the year in the Southern Economic Journal. He has testified as an expert witness on minimum-wage policy before the US Senate Committee on Finance and the New York City Council. Previously, Sabia served on the faculties of the University of Georgia, American University, and the US Military Academy at West Point.
Heidi Shierholz is a labor market economist with the Economic Policy Institute in Washington, DC. She has researched, written, and spoken widely on the economy and economic policy as it affects middle- and low-income families, especially in regards to employment, unemployment, labor-force participation, wages and compensation, income and wealth inequality, young workers, unemployment insurance, and the minimum wage. She is a coauthor of “The State of Working America, 12th Edition” (ILR Press, 2012), is a frequent contributor to broadcast and radio news outlets, and has repeatedly been called on to testify in Congress on labor-market issues. Previously she worked as an assistant professor of economics at the University of Toronto.