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Building an Economy That Supports All Children Requires Raising the Minimum Wage

A mother helps her son with his school work in Mount Vernon, New York, March 2020. She was furloughed from her job as a preschool teacher and her husband was laid off due to the coronavirus pandemic.

In a country where 11 million children live in poverty, it is clear that the economic status quo is not working for families. Even before the onset of the COVID-19 pandemic and resulting economic crisis, millions of children were falling through the cracks. As Congress considers a historic relief package to address the crisis that has upended the lives of children and families across the nation, policies that redress longstanding inequities exacerbated by the pandemic must be included. That includes providing direct support for families, transforming America’s fragile safety net into one that works for all, and raising wages to ease financial burdens. Gradually raising the minimum wage to $15 an hour, along with eliminating the subminimum wage for tipped workers and people with disabilities—as proposed by the Raise the Wage Act—would help low-wage workers and would play a part in ensuring that their children can live healthier, better lives.

A Center for American Progress analysis of 2020 Current Population Survey (CPS) data shows that almost 15 million children live in a household with a worker making under $15 an hour. Almost one-third of those households have an annual family income below $35,000. If the federal minimum wage were raised, children in every state would see an increase in their household’s income. (see Table 1)

Table 1

The demographics of low-wage workers and their children

Low-wage workers are disproportionately women and people of color, with women of color particularly overrepresented in these jobs. This sobering reality is an extension of a historical legacy of structural racism and sexism that manifests, in part, as labor market discrimination and occupational segregation. Those disparities are reflected in the disproportionate rate of child poverty for children of color. This disparity also extends to children in households headed by women in general. Many of those same children stand to benefit the most from an increase in the federal minimum wage. For instance, 9 million workers with children (28 percent of all workers who would benefit from an increased minimum wage) would experience a much-needed raise under the Raise the Wage Act. Eighty-five percent of workers who would experience a raise with a minimum wage increase are the primary or co-breadwinners for their families. Half of all children living in households with a worker making less than $15 an hour are Black or Latinx. Raising the minimum wage—along with phasing out the subminimum wage for tipped workers and people with disabilities—is a necessary step to ensuring that all workers can support themselves and their families.

Financial stability for families, or the lack thereof, has ramifications that are more than just financial. It is well-documented that poverty has serious and long-lasting consequences for children, including low birth weights, adverse health outcomes, developmental delays for young children, and an increased likelihood of experiencing poverty as an adult. Those negative impacts extend to the millions of families with incomes above the outdated federal poverty measure, who struggle to afford basic necessities such as food, housing, and health care. Raising the minimum wage and increasing incomes of low-wage families are important ways to prevent those consequences. For example, an increase in the minimum wage is associated with a decrease in child maltreatment reports; improved birth outcomes and reduced infant mortality; and significant improvements in child health, especially for young children. While the economic literature examining the direct impacts of increasing the minimum wage on children may be sparse, research shows that a higher family income is associated with better educational, behavioral, and health outcomes for children.

The lack of federal action on the minimum wage since 2009 is also a direct contributor to the stagnant wages and income inequality that characterize the U.S. economy and has a direct impact on children and their overall well-being. A U.S. Department of Agriculture report found that 93 percent of the rise in rural child poverty between 2003 and 2014 could be attributed to income inequality. By some estimates, if the minimum wage had risen at the same rate as economic productivity, more than 4 million fewer children would be in poverty in a full-employment economy.

There are 21 states in the country that have seen no state-level minimum wage increases and collectively are home to 7 million children living with a worker making less than $15 an hour. Stubbornly low minimum wage laws—along with other policy differences in state social safety nets and economies—have contributed to an unequal landscape that puts low-income children at a distinct disadvantage based on where they live. Child poverty rates, for example, vary dramatically across state borders, with particularly high rates in states such as Mississippi, Alabama, and Louisiana. After a decade without a mandated federal increase across the nation, millions of workers making under $15 an hour cannot wait any longer to ensure they are paid enough to survive—and neither can the children in their households.

Meanwhile, there is evidence that increasing state minimum wages is associated with a reduction in child poverty. In Maine, just the first phase of a voter-approved gradual increase in the minimum wage, from $7.50 to $9 an hour, helped lift 10,000 children out of poverty. Pennsylvania researchers estimated that a minimum wage increase to $15 an hour would bring hundreds of thousands of children above the poverty level in the state. And, in California, projections of the anti-poverty impact of a $15 minimum wage showed significant benefits for young children.

A 2019 Congressional Budget Office analysis found that the Raise the Wage Act would lift more than 500,000 children out of poverty across the country if it were passed. The effects of raising the minimum wage also extend beyond the significant help to families and children; increasing the minimum wage is associated with a decline in government spending on the Supplemental Nutrition Assistance Program (SNAP) since families experience an increase in their wages. Raising wages also boosts consumer spending, with every extra dollar a low-wage worker receives adding about $1.21 to the broader economy.

Rather than a piecemeal state- and local-level approach that leaves out millions of families and locks in disparities for low-wage workers and their children, lawmakers must prioritize passing a federal minimum wage that begins to ensure that children in all states can have their basic needs met.

In the midst of a pandemic and economic crisis that has devastated millions of severely underpaid, low-wage workers and their families, Congress cannot hold off on a long-overdue minimum wage increase to ensure their financial security and well-being. And for millions of low-income children in America, raising the wages of those who care for them is just one of the necessary actions Congress must take to ensure that, in this historic moment, we rebuild an economy where no child is poor.

Areeba Haider is a research associate for the Poverty to Prosperity Program at the Center for American Progress.

Methodology

The findings in this column are based on CAP’s analysis of 2020 Current Population Survey Outgoing Rotational Groups (CPS-ORG) data extracts made publicly available by the Economic Policy Institute. The analysis includes workers ages 16 and older who were in the labor force and employed and were not self-employed.