Minimum Wages and Public Assistance: Do Higher Minimum Wages Reduce Government Spending?

Thanh Tam Nguyen, San Diego State University

A number of policymakers have advocated minimum wage increases as tools to fight against poverty and thus reduce government spending. Using data from the Survey of Income and Program Participation (SIPP) between 1996 and 2013, we study the effects of minimum wage increases on a number of government assistance programs, including SNAP, TANF, Medicaid, and SSI. The longitudinal nature of the SIPP allows us to examine individual- and family-specific transitions onto and off of public assistance in response to minimum wage increases. This analysis is supplemented by the use of aggregate state-by-year data on welfare caseloads and public expenditures. Preliminary difference-in-difference estimates suggest that minimum wage increases are associated with no net changes in government benefit receipt in the pre-Great Recession Era. While minimum wage increases may aid some working families in leaving the welfare rolls, adverse labor demand effects may increase government benefits received by others.