The poor families that benefit from an increase in the minimum wage do so because the higher minimum tends to raise earnings per worker in families with working members both before and after the increase. This disemployment effect is concentrated among families that were previously only a little above the poverty line. Given these findings, it is difficult to make a distributional or equity argument for minimum wages. Matching the CPS files provides two years of data on families, allowing the authors to trace families' transitions into and out of poverty, or between other parts of the income distribution. A higher minimum wage, they write, generates tradeoffs with respect to the incomes of poor and low-income families.
Some families gain and others lose.
According to the authors, previous research tells us very little about the effects of minimum wages on family incomes. In particular, knowing the likely employment effects of minimum wages on individual workers is not very helpful in assessing the impact of the minimum wage on the incomes of poor families. For example, a hike in the minimum wage for one family member may induce another member of the family to work less, or may lead to a change in family living arrangements. Alternatively, some workers disemployed because of a minimum wage increase may become eligible for government benefits, such as welfare, which could ease the negative effects on total family income. The impact of minimum wage increases on poor families will be influenced by the level of family income of those minimum-wage workers who get the largest raises and, perhaps more importantly, by the family income of those who become disemployed.