Will There Be a Child Care Benefit Cliff if We Raise the Minimum Wage?

Marc Stier |


Raising the minimum wage is one of the most important steps that Pennsylvania can take to fix a political economy that has been tilted against working people for decades. Two bills before the General Assembly, HB1215 and SB12, propose increasing the minimum wage to $12 per hour on July 1, 2019, and increasing the wage in 50-cent increments until it reaches $15 per hour in 2025. Raising the minimum wage to $15 would ultimately lift wages for two million Pennsylvanians, not only those who make the minimum wage now or who would after an increase, but also many whose wages would be pushed higher when the floor on wages is raised. Raising the minimum wage would also help local economies and the economy of the state as a whole by giving working people the capacity to buy more goods and services. Every state around Pennsylvania has raised the minimum wage in recent years and we have found that, as a result, both employment and wages have gone up in those states in the typically low-wage food service sector, the industry where opponents of raising the minimum wage expect to see declines in employment.

One concern about raising the minimum wage is whether doing so would make it impossible for low-income workers to receive some of the federal and state benefits they obtain now such as SNAP (food stamps), the Earned Income and Child Care Tax Credits (EITC and CTC), LIHEAP, and subsidies to secure child care. It would be a pyrrhic victory to raise the minimum wage for Pennsylvania’s long-suffering low-wage workers if they were only to find that their circumstances are not much improved because their higher wages result in much reduced social safety net benefits. Or, to use the common phrase, we don’t want low-wage workers to fall off the benefits cliff as their wages go up.

As Pennsylvania considers Governor Wolf’s proposal to raise the minimum wage in the state to $12 on July 1 and then in stages to $15, it is time to consider this issue in some detail. This is the second of two papers on cliff effects, focusing on one of the most important programs Pennsylvania offers low-income families: subsidized child care benefits. The first paper integrates the finding of this one in a broader look at the impact of federal and state taxes and a range of federal and state safety net programs, including Medicaid and the ACA, SNAP, the Earned Income and Child Care Tax Credits, and child care subsidies.