David Neumark has a nice piece in the NYT today for folks that want to think about helping low-income individuals and families. His main point is that even if you thought minimum wage increases would help low income people it is an inefficient way to do it compared to the earned-income credit (EIC):
The fundamental difference is that the earned-income tax credit aims benefits at low-income families with children, rather than simply low-wage workers. This is in large part its virtue, and it makes a lot more sense than the minimum wage’s focus on low-wage workers. Do we really care if a low-wage teenager in a middle-class family makes an extra dollar an hour? Economists of all persuasions in the minimum-wage debate agree that mandated wage floors do a bad job of directing benefits to low-income families. This is confirmed in recent research by my graduate student Sam Lundstrom, calculating who would be affected by increasing the current federal minimum to $8.25 from $7.25. He finds that only 21.3 percent of the affected workers would be in poor families, while 30.9 percent would be in families with incomes more than three times the poverty line.
The EIC tax policy has been effective at getting resources to the poor. Given that most individuals are poor for a limited time there is reason to suspect it is effective too. That is, by encouraging work, tax policy helps increase the number escaping poverty because low wage jobs often lead to higher wage jobs. Much is built into the structure of the EIC. It is unlikely to be optimally structured so if you want to find an effective way to help the poor on a federal level then EIC is an easy choice.
Neumark and his associates have been looking at some combinations of minimum wage and EIC. One of the problems he finds is that raising the minimum wage has adverse employment outcomes for some groups.
Policies that help the poor are easy to find. EIC and welfare changes are two easy choices. The challenge is to make the incentives towards work while providing, for most people, temporary support.
A MWG quibble: Neumark says
The decline in the real value of the minimum wage is indisputable.
The answer is it depends on when you start. See the chart for the full history of real and nominal minimum wage. Since the minimum wage was established in 1938 it probably has had a real value greater than 2013 for most of the years but if you start from 1938 or a variety of other years then the 2013 minimum wage is higher than the starting point. So it depends what year you start from. MWG finds it disputable.