The minimum wage is an outdated mechanism that does not help the working poor fight poverty, asserts a Cornell University economist. In fact, he says, 83 percent of minimum-wage benefits go to teenagers and other workers living in families above the poverty line, the majority of whom live in middle-class families far above the poverty line.

"Minimum wage policies should be abandoned and placed in the museum of antiquated policies," said Richard Burkhauser, the Sarah Gibson Blanding Professor of Policy Analysis and Management at Cornell. A prominent economist and policy scholar on the minimum wage, Burkhauser made these statements in April, while testifying before the U.S. House of Representatives Committee on Education and the Workforce.

"Instead, we should expand Earned Income Tax Credits (EITC), which more effectively target the working poor," said Burkhauser. "Workers who have children but low family incomes, for example, receive a 34 percent to 40 percent tax credit, which essentially boosts their minimum wage rate from $5.15 to $7.21 per hour. And because it's government supported, the labor force doesn't lose jobs as it does when the minimum wage goes up."

Congress is likely to vote in the fall on whether the minimum wage should be raised to $6.15 by 2002. Some economists calculate that such a minimum wage increase could cost the labor force some 436,000 jobs.

Burkhauser pointed out that only one out of three of the working poor gained from the last federal minimum wage hike in 1996. The others were poor despite having higher rates because they either earned more than the minimum wage, worked part time or had large families. Of the $3.39 billion in additional wages generated by the last minimum wage hike, Burkhauser found that only 17 percent went to the families of the working poor. The other 83 percent primarily went to second or third earners whose families had income that was often well above the poverty line, indicated by the federal government to be $16,450 a year for a family of four.

Teenagers are the group of workers most affected by the minimum wage, he said. When the minimum wage went from $4.25 to $5.15 in 1996, 44 percent of teenage workers benefited, but only 17 percent of those teenage workers lived in poor families. The majority, 51 percent, lived in families whose income was three or more times above the poverty line.

"Minimum-wage increases are extremely ineffective as a mechanism for reducing poverty," he said. "They were never very target-efficient and are even less so today."

The EITC, on the other hand, he noted, is based on family income, not on an hourly wage rate. A worker in a low-income family earning more than $5.15 per hour is eligible for tax credits, while a minimum-wage earner from a higher-income family is not.

"Because of the dramatic improvements in the EITC program passed by a bipartisan majority of Congress in 1993 and fully implemented in 1996, workers with one child now have an effective minimum wage of $6.90 (the $5.15 per hour minimum wage plus a 34 percent credit of $1.75), and workers with two or more children have an effective minimum wage of $7.21 per hour ($5.15 plus the 40 percent credit of $2.06)," said Burkhauser. He pointed out that low-income workers without children now receive only "a very modest" EITC.

"Rather than increase the minimum wage, we should look into expanding the breadth of the EITC program by giving earned income tax credits to older, disabled and other low-income workers without children. We also should look into increasing the generosity of the tax credits to better help poor workers with children to earn a living wage."