INCREASED INCOME FROM RAISING MINIMUM WAGE IS GREATER, AND IN MOST CASES, FAR GREATER THAN THE LOSS IN BENEFITS AND NEW TAXES PAID
HARRISBURG—As Pennsylvania seriously considers raising the minimum wage for the first time in over a decade (and as the U.S. House prepares to vote on a bill to increase the minimum wage federally), concerns have been raised that workers receiving a higher wage also will face a “benefits cliff.” A benefits cliff occurs when individuals get a wage increase but the social benefits they lose and the taxes they pay increase more than their additional earnings, resulting in an overall reduction in a family’s standard of living.
The Pennsylvania Budget and Policy Center today released two policy briefs examining the effects of a minimum wage increase to $15/hr in Pennsylvania. One brief examines a wage increase when compared to any cuts in benefits from programs/tax breaks like the Earned Income Tax Credit (EITC), the Child Tax Credit (CTC), the Supplemental Nutritional Assistance Program (SNAP), Women, Infants and Children (WIC), housing subsidies, child care subsidies, and health care subsidies. The second brief examines in detail effects of a wage increase compared to benefits from the Child Care Works program.
For almost all families the increased income that comes from raising the minimum wage is greater, and in most cases, far greater than the loss in benefits and higher taxes they would pay. That said, given the potential of these effects to have an impact on some hard-working families still struggling to get by after a minimum wage increase, concerned legislators should explore the opportunity to increase funding for, and potentially modify eligibility criteria for, safety net programs to further reduce cliff effects and maintain public benefits for families that need them.