New Analysis: Average Family Income of Connecticut Wage Hike Beneficiary Above $80,000 Per Year

Research Suggests Proposed Minimum Wage Increase Will Not Reduce State Poverty Rates
  • Publication Date: March 2012

  • Topics: Minimum Wage

WASHINGTON – Today, the Employment Policies Institute (EPI) released a new analysis assessing the impact on poverty in Connecticut of Speaker Christopher Donovan’s proposed minimum wage increase (HB 5291).

The bill would raise Connecticut’s minimum wage from $8.25 to $9 per hour this year and then to $9.75 per hour next year, indexing the wage to rise with inflation in subsequent years.

According to EPI’s analysis of Census Bureau data, if the state minimum wage were increased to $9 per hour, the average family income of an affected employee would be $81,291 per year. This is because nearly three-quarters of the beneficiaries of the proposed wage hike are either living at home with family or have a spouse that also works.

The full analysis is available here: http://epionline.org/downloads/120305_EPI_PolicyBrief.pdf

“Past economic research has clearly shown that raising the minimum wage is a poor way to reduce poverty, and this latest proposal in Connecticut is no exception,” said Michael Saltsman, research fellow at EPI. “The data show that affected minimum wage earners are often young, working part-time, and living at home in families with incomes far above the poverty line.”

Over 42 percent of the beneficiaries of a proposed wage increase to $9.00/hour are young people age 21 and under. Nearly 60 percent of the affected employees are living at home with family.
“Speaker Donovan and the bill’s supporters claim this legislation is needed to help single mothers,” Saltsman continued. “The data show that single adults supporting children on their own make up only about four percent of the beneficiaries of the proposed minimum wage increase.”

Twenty-eight states (including Connecticut) raised their minimum wage between 2003 and 2007, with the stated goal of reducing poverty. However, research from economists at Cornell University and American University found no associated reduction in poverty. To explain this finding, the authors cited a reduction in demand for less-experienced employees following the wage hike and poor targeting to low-income families.

“Connecticut’s new supplement to the Earned Income Tax Credit is better-targeted at families in poverty and will not result in loss of employment or hours,” Saltsman concluded. “Lawmakers should focus on evaluating and tweaking this existing policy instead of resorting to a poorly-targeted minimum wage hike that makes it more difficult for low-skilled job applicants to get hired.”

For comment, contact Anastasia Feaster at 202-463-7650.