The most recent issue of Canadian Public Policy has this short note:
Minimum Wage Increases as an Anti-Poverty Policy in Ontario: In this article, we consider the possibility of alleviating poverty in Ontario through minimum wage increases. Using survey data from 2004 to profile low wage earners and poor households, we find two important results. First, over 80 percent of low wage earners are not members of poor households and, second, over 75 percent of poor households do not have a member who is a low wage earner. We also present simulation results which suggest that, even without any negative employment effects, planned increases in Ontario's minimum wage will lead to virtually no reduction in the level of poverty.
I've blogged on this before, but it's worth doing so again.
The intersection of ... low wage earners and members of poor households ... is the target group for poverty alleviation through minimum wage increases. According to our calculations, 17.1 percent of all poor individuals or 23.2 percent of all poor households fall into this category. In other words, an increase in the minimum wage to $9.10 per hour in 2004 would have likely have affected less than one-quarter of all poor households. On the other hand, over 80 per cent of the potential beneficiaries of such an increase in the minimum wage do not belong to a poor household.
This is the point to take away. According to their data, something like 10.3% of people live in low-income households, and 10% have low wages. The two groups are roughly the same size, but the overlap is small: only 1.8% are in the intersection:
This discrepancy may seem puzzling, until you take into account the fact that almost 90% of low-wage earners are between the ages of 16 and 24 - and most of them do not live in poor households.
Even under the assumption that there are no employment effects, "only 10.66 percent of total wage increases accrue to workers belonging to poor households." Given that 10.3% of households are in poverty, increasing the minimum wage is only slightly more effective as an anti-poverty measure as would be distributing money at random across households.
If employment effects are taken into account, the story gets worse. The gains from higher wages are so small that available estimates for labour demand elasticities suggest that there is a significant risk that increasing the minimum wage will increase poverty.
It would be a good thing if those who were concerned with reducing poverty could stop wasting time on the minimum wage file. As anti-poverty measures go, increasing the minimum wage is pointless at best.