An increase in the federal minimum wage has been one of several alternative policy proposals that have been offered to address poverty. Pending before the 113 th Congress is legislation, S. 1737 (Senator Harkin) and H.R. 1010 (Representative Miller), that would raise the federal minimum wage from its current law $7.25 to, in three steps, $10.10 per hour. If these bills were enacted in 2014, the minimum wage would rise to $10.10 per hour sometime in 2016. The minimum wage would be adjusted for inflation thereafter. An expansion of the Earned Income Tax Credit (EITC) is an often-mentioned alternative to raising the minimum wage. The EITC currently supplements the wages of low-wage workers, mostly low-wage parents with children. Low-wage workers with children may receive additional income supplements through the child tax credit, and might qualify for certain need-tested government benefits such as the Supplemental Nutrition Assistance Program (SNAP, formerly known as food stamps). If Congress sought to pursue an increase in incomes for low-wage earners, there is a debate over whether increases in the minimum wage or expansions of government aid through the tax system or benefit programs are more effective in helping low-income families and addressing poverty. The minimum wage affects workers regardless of their family status; the federal tax system and government benefit programs take into account family circumstances in determining tax liabilities and benefits. Therefore, minimum wage and earnings supplement policies have differing impacts, depending on a worker's family type. This report focuses on the impact of minimum wage and tax-transfer earnings supplements for workers of different family types. It does so through illustrating how the minimum wage and federal tax-transfer policies affect the income of a minimum wage worker who works full-time, full-year in four different family types: a single childless worker; a worker supporting a married couple; a single mother with two children; and a married couple with one child. These family types are chosen to highlight the different treatment federal tax-transfer policies have on workers of different family types. They were not chosen as representative of most minimum wage workers. The illustrations show the impact of policies on two childless workers—one married, one not. They also show the impact of two workers with children—one married, one not. The report highlights how policies differ between families with children, and families without children. This report supplements these illustrations with some background on policies, as well as some policy considerations that apply generally to debates on the minimum wage and tax-transfer policies. Full-year, full-time work at the minimum wage is not common. In 2012, 32% of workers earning the minimum wage worked full-time. Again, the illustrations were not chosen to be representative of most minimum wage workers. Full-time, full-year work was chosen for illustrative purposes. Additionally, the income produced by full-time, full year work at the minimum wage is an important policy benchmark, as it reflects the federally-determined minimum income for someone with full-time involvement in the labor force. This report describes current law minimum wage and tax-transfer earnings supplement policies; provides the illustrations of gross earnings and net income (after taxes and SNAP benefits) for full-time full-year minimum wage workers at both the current minimum wage ($7.25 per hour) and the proposed $10.10 minimum wage; and discusses some of the policy implications of addressing poverty through both the minimum wage and federally-funded earnings supplements. This report does not address all potential taxes and benefits for which a minimum wage worker might be eligible. For example, housing assistance and assistance funded through the Temporary Assistance for Needy Families (TANF) were not considered. These programs are not entitlements to individuals and affect a relatively small population. This report also does not consider state taxes and benefits; they vary by state. Further, the report does not consider health care benefits and subsidies, and in particular, this report excludes the health care premium subsidies provided under the Affordable Care Act of 2010. These subsidies further depend on individual circumstances (e.g., if employer-provided health care is available for the family's earner). Consideration of health care premiums and benefits would greatly complicate the analysis. The Fair Labor Standards Act (FLSA), enacted in 1938, is the federal legislation that establishes the general minimum wage that must be paid to all covered workers. In general, the FLSA mandates broad minimum wage coverage. It also specifies certain categories of workers who are not covered by FLSA wage standards, such as workers with disabilities or certain youth workers. In 1938, the FLSA established a minimum wage of $0.25 per hour. The minimum wage provisions of the FLSA have been amended numerous times since then, typically for the purpose of expanding coverage or raising the wage rate. Since its establishment, the minimum wage rate has been raised 22 separate times. The most recent change was enacted in 2007 with P.L. 110-28 , which increased the minimum wage from $5.15 per hour to its current rate of $7.25 per hour in three steps. Since the late 1960s, increases in the minimum wage have not kept up with increases in consumer prices. That is, the purchasing power of income earned by a minimum wage worker has declined. For example, the February 1968 minimum wage of $1.60 would be "worth" in 2013 dollars $10.69. The most recent data available indicate that there are approximately 3.6 million workers, or 4.7% of all hourly paid workers, whose wages are at or below the federal minimum wage of $7.25 per hour. Of these 3.6 million workers, approximately 1.6 million earn the federal minimum wage of $7.25 per hour and the other 2 million earn below the federal minimum wage. As the Bureau of Labor Statistics (BLS) notes, the large number of individuals earning less than the statutory minimum wage does not necessarily indicate violations of the FLSA but may reflect exemptions or misreporting. In addition to the FLSA minimum wage, states may also choose to set labor standards that are different from federal statutes. The FLSA establishes that if states enact minimum wage, overtime, or child labor laws more protective of employees than those provided in the FLSA, the state law applies. In the case of minimum wages, this means that if an individual is covered by the FLSA in a state with a higher state minimum wage, the individual is entitled to receive the higher state minimum wage. On the other hand, some states have set minimum wages lower than the FLSA minimum. In those cases, an FLSA-covered worker would receive the FLSA minimum wage and not the lower state minimum wage. As of January 1, 2014, 21 states and the District of Columbia had minimum wage rates above the federal rate of $7.25 per hour. These rates range from $7.40 per hour in Michigan to $9.32 in Washington state. On that date, 20 states had a minimum wage equal to the federal rate of $7.25 per hour. Four states have minimum wage rates below the federal rate and five have no minimum wage requirement. In the states with no minimum wage requirements or wages lower than the federal minimum wage, only individuals who are not covered by the FLSA are subject to those lower rates. A person working full-time (40 hours per week) all year (52 weeks per year) at the current federal minimum wage of $7.25 per hour earns a gross $15,080 for the year. This is before taxes and any government benefits the individual might be entitled to receive. Gross earnings depend on hours worked and the wage rate paid to that individual. However, full-year, full-time work at the minimum wage produces a different standard of living depending on the family circumstances of the worker. Larger families typically "need" more income to cover just the necessities of life (food, clothing, and housing), with a family's poverty status depending on both (1) its income; and (2) number of people in the family. The greater financial need of larger families is reflected in the official federal poverty guidelines. Table 1 shows the 2014 poverty guidelines (the Federal Poverty Level, or FPL) for family sizes of one through six. As shown in the table, a single (1 person) full-year, full-time worker earning the current federal minimum wage has gross earnings ($15,080) above the estimated 2014 poverty guidelines. However, such a worker in a family of two or more people has gross earnings less than the 2014 poverty guidelines. Figure 1 shows how gross earnings from full-time, year-round work relate to poverty-level income. These poverty ratios are shown for four different family types: a single, childless person; a childless couple; a single mother of two children; and a married couple with one child. It shows that gross earnings from full-time, year-round minimum wage work exceed poverty-level income only for the single, childless person. For the three other family types, gross earnings from full-year, full-time minimum wage work fall short of poverty level income. The economic well-being of a family—the amount of goods and services it is able to consume—depends not on gross earnings, but on net income. Net income amounts to those dollars available to a family after taxes have been paid and government benefits have been received. For example, almost all earners pay Social Security taxes which reduce their take-home pay. Federal income taxes also might reduce take-home pay. Under a progressive tax system, like the federal income tax, required tax payments are based on the ability to pay: families at higher level of earnings are taxed at a higher rate.