News Story

More People On Food Stamps After Past Minimum Wage Increases

Nonetheless, Center for American Progress report contradicts recent trend

While proponents of mandating a higher minimum wage claim it would help Michigan residents get off food stamps, the evidence from past increases shows this not to be true.

In 2007, the minimum wage in Michigan increased from $5.15 an hour to $6.95 an hour. That year, the number of people on food stamps increased from 1.1 million to 1.2 million. In 2008, the minimum wage increased again from $6.95 an hour to $7.15. Again, the number of food stamp recipients went up from 1.2 million to 1.26 million.

Yet, the left-leaning Center for American Progress recently released a report that claimed raising the minimum wage to $10.10 would get at least 110,000 families in Michigan off food stamps. President Obama and political allies are pushing for the higher mandated wage. The Center for American Progress has strong ties to the Clinton and Obama administrations. The group's president, Neera Tanden, worked as director of domestic policy for the Obama-Biden presidential campaign and also has worked as policy director for Hillary Clinton's presidential campaign. 

"The economy is complex and there are many factors working among each other," said James Hohman, assistant director of fiscal policy at the Mackinac Center for Public Policy. "Michigan's experience shows that the direction of the economy is the most important factor in whether food stamp rolls increase or decrease."

The Employment Policies Institute cited a half dozen studies and analyses from 2003 to 2009 that highlights why a correlation between minimum wage and food stamps is on shaky ground.

EPI pointed out that in 2009, the average family income of those earning minimum wage was more than $48,000. The 2009 U.S. Census stated that 16.5 percent of those earning minimum wage were raising a family on minimum wage. The remaining 83.5 percent were teenagers living with working parents, adults living alone or married couples with dual incomes.

And EPI cited a Ball State University study that found when the federal minimum wage increased by 40 percent from July 2007 to July 2009 there were 550,000 fewer part-time jobs as a result of the increase.

According to EPI, when employers are faced with higher labor costs, they hire workers with more work experience and higher skill levels. Workers with lower skills and less work experience are pushed out of the market for jobs.

Mandating a higher minimum wage also is associated with job losses. A Congressional Budget Office report released in February said increasing the wage mandate to $10.10 per hour would lead to the loss of about 500,000 jobs. The report also said some employees would be paid more, but that would come at the expense of others being laid off. The laid off workers would be more likely to use food stamps and other government programs.

The results of the Center for American Progress study contradict what studies have shown about minimum wage, said Antony Davies, an associate professor of economics at Duquesne University.

"Increases in the minimum wage may or may not result in an increase in overall unemployment," Davies said. "However, increases in the minimum wage do result in a shifting in employment away from lesser skilled, lesser educated workers toward higher skilled, higher educated workers.  Minimum wage increases provide increases in incomes for workers who keep their jobs, but cause decreases in incomes for workers who are laid off."

Davies said in times of prosperity, food stamp use declines because more people are working. Also, when the economy is thriving, there tends to be an increase in minimum wage.

"There is no causal relationship between minimum wage and food stamps, rather rising incomes are driving both of the measures," Davies said.

Small business owners in Michigan say a mandated wage increase would lead to layoffs and higher prices.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.