Report: Minimum wage hike would cut food stamp spending by $4.6 billion a year

Raising the minimum wage from $7.25 to $10.10 an hour would reduce federal food stamp spending by $4.6 billion a year, according to a report to be released Wednesday by the liberal-leaning Center for American Progress.

The proposal, a top legislative priority for President Obama and congressional Democrats, would reduce enrollment in the food stamp program by as much as 9.2 percent, the report said.

A report last month from the nonpartisan Congressional Budget Office said about 15 percent of the nation’s workforce would see wages rise under Obama’s plan to raise the minimum wage, adding that the increase would lift 900,000 people out of poverty.

The CAP report, which was written by University of California Berkeley researchers Rachel West and Michael Reich, is the latest in a line of research highlighting the connection between low-wage work and government support programs.

Last year, a report done by researchers at Berkeley and the University of Illinois asserted that taxpayers are spending nearly $7 billion a year to supplement the wages of fast-food workers, many of whom earn the minimum wage or close to it.

Democrats are making a midterm election year push to raise the federal minimum wage. Reid Wilson takes a look at what that would mean for two cities. (Jeff Simon/The Washington Post)

“What is the best way to make people independent and be able to sustain their standard of living without having to depend on government support?,” Reich asked. “It turns out that raising the minimum wage helps make people more independent while saving the government money.”

Conservative researchers disagreed with the conclusions of the CAP report. Citing research showing that roughly half of able-bodied adults who receive food stamp benefits do not work in both good and bad economic times, Rachel Sheffield, a Heritage Foundation policy analyst, said having work requirements for food stamps would do more to encourage self sufficiency than raising the minimum wage.

“A work requirement would also do more to reduce overall welfare costs in the long run,” Sheffield said.

Raising the minimum wage is staunchly opposed by many Republicans who say it would impose unsustainable costs on business and slow job creation. Still, raising the minimum wage seems to be popular with the public, as polling shows that more than six in 10 Americans support the idea.

The Supplemental Nutrition Assistance Program, or food stamps, reaches about one in seven Americans and cost the government $78 billion in 2011, according to the report. Eligibility for the program is limited to households earning no more than 130 percent of the poverty threshold, or about $19, 530 for a family of three.

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Michael A. Fletcher is a national economics correspondent, writing about unemployment, state and municipal debt, the evolving job market and the auto industry.
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