Raising Minimum Wage Lifts Single Mothers Out of Poverty and Boosts U.S. Economy, Policy Report Shows

Dec. 19, 2012

AUSTIN, Texas — Raising the minimum wage to a living wage begins the cycle of lifting single mothers out of poverty, according to a policy report released by the Institute for Urban Policy Research & Analysis (IUPRA) at The University of Texas at Austin.

The U.S. census shows more Americans  — 46.2 million people — are living in poverty than ever before. And for African American and Hispanic women, a full-time minimum wage job isn’t enough to break out of the poverty cycle. According to the report, working women of color make $0.64 and $0.56, respectively, for every dollar white men earn.

Shetal Vohra-Gupta, an IUPRA research fellow, said this disparity is concerning because female-led households with children have increased by approximately 10 percent during the past decade — and more families than ever before depend on women as primary breadwinners.

To illustrate the adverse effects of a stagnant minimum wage, the analysis points to Texas, which has the largest number of low-wage workers ($7.25/hour) in the nation, according to the Bureau of Labor Statistics. Despite its national reputation for economic growth, Texas ranks sixth in the number of people living in poverty, and its poverty rate is growing faster than the national average, according to the 2010 U.S. census.

African American and Hispanic women are hit the hardest. Drawing from U.S. census and American Community Surveys data, the report shows the nation’s total of single-mother households increased 163 percent among Hispanics and 33 percent among African Americans during the past decade.

To rise above the poverty threshold, a single mother raising two children and working full time would need to earn $17.50 to
$31.60 an hour, according to the Economic Policy Institute, a nonpartisan think tank for economic research. This amount, known as the living wage, is more than twice the average minimum wage in most communities.

The findings indicate that Congress should work to increase the federal minimum wage and then adjust it to inflation in order to increase purchasing power and ultimately boost the U.S. economy. King Davis, professor of African and African Diaspora Studies and IUPRA director, says the report reveals the dire implications of a stagnant minimum wage on the U.S. economy.

“Low wage earners cannot participate fully in the economy, thus lowering the overall economic health of their neighborhoods and communities,” Davis says. “Dr. Vohra-Gupta identifies that where race, low education and limited skills combine, the risks of long-term poverty for the women and their children requires policy action by a Congress that is intent on eliminating rather than increasing the worth of entitlements.”

In a separate policy report, Vohra-Gupta and a team of IUPRA researchers analyzed demographic trends in the African American population in Texas since 1950. The findings show that single mothers comprise the third largest group of householders. Of the 24 percent living below the poverty level, single mothers comprise 65 percent.

The researchers also found the share of African Americans in the category of “high school graduate, GED or alternative” is five percentage points higher than the general population. Yet that group is seven percentage points lower in the category of “bachelor’s degree or higher.”

The reports raise important questions about several important issues, such as racial disparities in higher education, the economic toll of a stagnant minimum wage and the cycle of poverty among African American single mothers.

“Wages that do not provide women with the ability to meet their needs is a major national problem that is often ignored,” Davis says. “This research shows just how concentrated low wages are in populations of women of color. The absence of a living wage greatly limits their ability to sustain themselves and their families or get out of poverty.”

For more information, contact: Jessica Sinn, College of Liberal Arts, 512-471-2404; King Davis, IUPRA, 512-471-4672; Anna-Lisa Plant, Department of African and African Diaspora Studies, 512-471-4377

6 Comments to "Raising Minimum Wage Lifts Single Mothers Out of Poverty and Boosts U.S. Economy, Policy Report Shows"

1.  Mitch Rozen said on Dec. 19, 2012

I unfortunately strongly disagree with this article. Raising the Minimum Wage without any regulation on companies only gives them Just Cause to lay people off by justifing that they can no longer afford to keep people on the payroll.

I strongly believe in a free market economy but there needs to be some kind of balance making companies accountable in keeping employees and no allowing them to get rid of people when ever they see fit in order to make their books look better.

-Mitch Rozen, Rochester, NY

2.  Chris N. said on Dec. 19, 2012

Minimum wage legislation has the economic effect of telling employers that they cannot hire people that have skills that produce less than the minimum wage. If a person has a skill worth $5.25 per hour and you have to pay him $7.25/hr., he is likely to be unemployed. Just because legislators put words on paper that dictate people are to be paid more than they produce, doesn't make them produce at a higher level. When you make it expensive for employers to hire low skilled people, you will have less low skilled people employed. Not only does minimum wage legislation cause high unemployment and increased poverty, it concentrates its effects toward those people it claims to help - minorities and young people entering the job market.

3.  anon said on Dec. 19, 2012

Yeah, there oughta be a law. Make companies pay people more than they are worth. That's the ticket.

4.  Joe V said on Dec. 20, 2012

Just a quick comment that worker productivity has far outpaced wages especially for low-income workers. Not saying that necessarily justifies governmental policy to increase wages but companies are not spreading the wealth around to those who do the grunt work. Workers should be asking for raises and if they are unsatisfied then they should look for different work or find ways to become more marketable.

5.  Connor H said on Dec. 23, 2012

In response to those who say that raising would mean you're overpaying those who only have skills worth $7.25 if you raise min. wage, that is simply outlandish. You seem to forget how businesses spin a profit; by exploiting their worker's labor. You may say someone's labor at McDonald's is only worth $7.25 an hour but the simple fact of the matter is that the total value of their labor is worth MUCH more, what with all of the food they could make and or sell each hour. But they're only paid for a small chunk of their labor value(only 7.25) while the rest of that money goes into the pockets of the guy up top.
So essentially you're not overpaying people if you raise minimum wage, you're actually giving them more money out of the full value of their labor(exploiting them slightly less).
The downside according to the article and arguments others have made is that raising min. wage could increase unemployment because companies may hire less people if they have to pay them more. This is why there has to be some form of government regulation included within a min. increase to protect people from layoffs and allow people who previously worked min. wage jobs to still be able to be hired at those types of jobs.

6.  Chris N said on Jan. 5, 2013

If you think that raising the minimum wage would lead to much better outcomes, then why stop the minimum wage at $7.25. Let's raise it to $19.99 per hour! Wow, everyone would be better off, no? And we'll stick it to the 'man', no more ‘obscene profits’.

Back to reality. Think of the effect of someone coming out of high-school – no wait, a high-school dropout trying to enter the job market. You tell me that their previous inability to finish school, no job experience, and no demonstrable work ethic has a chance at all signaling to an employer that he or she should get a job at $19.99/hr?

The wage should reflect the worker's productivity, the same way a thermometer reflects the temperature in a room. Forcing the readout on the thermostat to 72 by placing an ice cube on it when in fact the temperature is 95 does not make the room feel like it’s 72. Likewise, legislation that says someone should be paid at $19.99 doesn’t mean they produce $19.99 worth of value to their employer. Someone who in reality produces at $5.25/hr does not give $7.25/hr of value to the company. I’m sorry, but your claim that they produce more than the $7.25 doesn’t cut it.

The minimum wage legislation creates distortions and inefficiencies in the labor market which forces employers to act in a way that adversely affects those entering the labor market or those with low skills. The price of their skills (wages) should reflect the relative scarcity of others with similar productivity. Workers with common skills, as those that work at McDonalds will have lower wages as there are large supplies of people that have those skills. Other businesses do not have to compete (as much) for those low skills as there are PLENTY of people to choose from at this level.

Producers have every incentive to pay their employees as much as possible as other businesses also compete for this labor. If Bob at McDonalds has skills worth $9.00 but McDonald’s only pays him $7.25, Burger King would be foolish not to pluck him up and hire Bob at $8.00 hour. But the reality is that some people don't have the skills, work history, that are consistent with higher wage positions. As low wage folks get more skills and more job history under their belt, they have upward mobility to better themselves and get a better wage. If upper management at McDonalds takes the profits for themselves and doesn’t take care of their employees, their employees will (voluntarily) go elsewhere and McDonalds will fail – as they should.

If you do some digging on where the minimum wage legislation came from, you’d see it was to protect working northerners against lower skilled minorities in the South who would work for lower wages. JKF was a big proponent. When legislators by fiat attempt to artificially adjust a worker's productivity through these insidious statutes, they knock out the first couple rungs of the ladder of success. Good intentions without critical thinking lead to poor public policy decisions. The minimum wage should be $0. Any decree by words written on paper, signed by our glorious leaders is pure fantasy.