THE FACTS ABOUT PRESIDENT
OBAMA’S $9 MINIMUM WAGE
minimumwage.com • February 2013
In his recent State of the Union address, President Obama called for a 24 percent increase in the minimum
wage, from $7.25 an hour to $9 an hour, arguing that “this single step would raise the incomes of millions
of working families.”
But economists haven’t been nearly as optimistic. Here are the facts on President Obama’s proposal:
FACT: The President’s proposal will cost the country
hundreds of thousands of entry-level jobs
Using a plausible range of employment losses measured from past data, the
President’s $9 wage hike could cost as many as 457,900 jobs.1 Eighty-five
percent of the most credible research on the minimum wage from the last two
decades points to job loss following a wage hike.2 The President has only referenced one study which says otherwise—a study whose research methods and
conclusions have been thoroughly refuted by other economists.3 4
FACT: A $9 minimum wage will move more
people in to poverty than out of it
Economic research proves that the “losers” from a minimum wage increase—
those who move closer to the poverty line—outnumber the winners.5 That’s
because employees who lose hours of work (or their jobs) are worse off even
if the mandated hourly minimum is higher.
Wage hikes are also poorly targeted to people in poverty—the average family
income of someone impacted by the President’s proposal is $50,789.6
FACT: Hiking the minimum wage will have a
disproportionate negative impact on minority teens
Teen unemployment has been above twenty percent for more than four years—
a historical record. For black teens, the rate has been above 30 percent over the
same period. Research shows that the President’s proposal will worsen this situation: Each 10 percent increase in the minimum wage reduces the employment of
less-educated white males by 2.5 percent; for black males, that figure is more than
twice as large.7
FACT: A higher minimum wage will not stimulate
the economy
A comprehensive academic study of minimum wage increases between 1997
and 2007 found no economic boost associated with the policy.8 Even the
Federal Reserve study that proponents of the President’s plan are relying on
warns of “compelling” evidence that minimum wage hikes reduce employment.
Forcing higher labor costs onto low-margin businesses either means higher
prices, or fewer job opportunities.
Form
8862
(Rev. December 2012)
Department of the Treasury
Internal Revenue Service
Name(s) shown on return
FACT: For many low-income families, the minimum wage
is already above $9 an hour
Information To Claim Earned Income Credit
After Disallowance
▶ Information
▶ Attach to your tax return.
about Form 8862 and its instructions is at www.irs.gov/form8862.
OMB No. 1545-0074
Attachment
Sequence No. 43A
Your social security number
Before you begin: ✓ See your tax return instructions or Pub. 596, Earned Income Credit (EIC), for the year for which you are filing
this form to make sure you can take the earned income credit (EIC) and to find out who is a qualifying child.
✓ If you have a qualifying child, complete Schedule EIC before you fill in this form.
✓ Do not file this form if you are taking the EIC without a qualifying child and the only reason your EIC was
reduced or disallowed in the earlier year was because it was determined that a child listed on Schedule
EIC was not your qualifying child.
Part I
1
2
Roughly one in 10 people impacted by the President’s proposal are single parents.9
For these families and others, the minimum wage is already above $9 an hour
because of the Earned Income Tax Credit. This credit provides a 35 percent wage
subsidy for a single parent with two children. Research has shown that the EITC
is effective at boosting income and employment, but doesn’t have the unintended
consequences of a mandated wage hike.10
All Filers
Enter the year for which you are filing this form (for example, 2012) . . . . . . . . . . . . ▶
If the only reason your EIC was reduced or disallowed in the earlier year was because you incorrectly
reported your earned income or investment income, check “Yes.” Otherwise, check “No” . . . . ▶
Yes
No
Caution. If you checked “Yes,” stop. Do not fill in the rest of this form. But you must attach it to your tax return to take the
EIC. If you checked “No,” continue.
Could you (or your spouse if filing jointly) be claimed as a qualifying child of another taxpayer for the year
shown on line 1? See the instructions before answering . . . . . . . . . . . . . . . ▶
Yes
No
Caution. If you checked “Yes,” stop. You cannot take the EIC. If you checked “No,” continue.
3
Part II
4
a
5
Filers With a Qualifying Child or Children
Note. Child 1, Child 2, and Child 3 are the same children you listed as Child 1, Child 2, and Child 3 on Schedule EIC for the year
shown on line 1 above.
Enter the number of days each child lived with you in the United States during the year shown on line 1 above:
b Child 2 ▶
c Child 3 ▶
Child 1 ▶
Caution. If you entered less than 183 (184 if the year on line 1 is a leap year) for any child, you cannot take the EIC based on
that child, unless the special rule for a child who was born or died during the year shown on line 1 applies. See the instructions.
If your child was born or died during the year shown on line 1, enter the month and day the child was born and/or died.
Otherwise, skip this line.
a Child 1 ▶ (1) Month and day of birth (MM/DD) ▶
(2) Month and day of death (MM/DD) ▶
/
/
b Child 2 ▶ (1) Month and day of birth (MM/DD) ▶
(2) Month and day of death (MM/DD) ▶
/
/
c Child 3 ▶ (1) Month and day of birth (MM/DD) ▶
(2) Month and day of death (MM/DD) ▶
/
/
Enter the address where you and the child lived together during the year shown on line 1. If you lived with the child at more
than one address during the year, attach a list of the addresses where you lived:
a Child 1 ▶ Number and street
City or town, state, and ZIP code
b Child 2 ▶ If same as shown for child 1, check this box. ▶
Otherwise, enter below:
Number and street
City or town, state, and ZIP code
c Child 3 ▶ If same as shown for child 1, check this box. ▶
Or if same as shown for child 2 (and
this is different from address shown for child 1), check this box. ▶
Otherwise, enter below:
Number and street
City or town, state, and ZIP code
Did any other person (except your spouse, if filing jointly, and your dependents under age 19) live with
7
child 1, child 2, or child 3 for more than half the year shown on line 1? . . . . . . . . . . . ▶
Yes
No
If “Yes,” enter that person’s name and relationship to the child below. If more than one other person lived
with the child for more than half the year, attach a list of each person’s name and relationship to the child:
Name
a Other person living with child 1:
Relationship to child 1
b Other person living with child 2:
Otherwise, enter below:
If same as shown for child 1, check this box. ▶
Name
Relationship to child 2
Or if same as shown
If same as shown for child 1, check this box. ▶
c Other person living with child 3:
for child 2 (and this is different from the person living with child 1), check this box. ▶
Otherwise, enter below:
Name
Relationship to child 3
Caution. The IRS may ask you to provide additional information to verify your eligibility to claim the EIC.
6
FACT:
For Paperwork Reduction Act Notice, see page 3.
Cat. No. 25145E
People are not “stuck” at the minimum wage
The White House argues that the minimum wage has lost value due to inflation,
but they’re cherry-picking their years to suit their agenda. Had the wage been
indexed since it was created in 1938, it would only be about $4 an hour today.
Additionally, research shows that two-thirds of minimum wage employees
receive a raise in their first year on the job. 11
Form 8862 (Rev. 12-2012)
1.EPI analysis of Current Population Survey data. Job loss estimates based on elasticities presented in: Richard Burkhauser and Joseph Sabia. “Minimum
Wages and Poverty: Will a $9.50 Minimum Wage Really Help the Working Poor?” Southern Economic Journal 76(3). 592-623.
2.David Neumark and William Wascher. “Minimum Wages and Employment.” Foundations and Trends in Microeconomics. 2007. Vol. 3, Nos. 1-2, pp 1-182.
3.http://www.whitehouse.gov/the-press-office/2013/02/13/fact-sheet-president-s-plan-reward-work-raising-minimum-wage
4.David Neumark J.M. Ian Salas and William Wascher. “Revisiting the Minimum Wage-Employment Debate: Throwing out the baby with the bathwater?”
NBER Working Paper no. 18161
5.David Nuemark, Mark Schweitzer, and William Wascher. “The Effects of Minimum Wages on the Distribution of Family Incomes: A Non-parametric
analysis.” Journal of Human Resources 40, no. 4. Pp. 867-894.
6.
EPI analysis of Current Population Survey data.
7.William Even and David Macpherson. “Unequal Harm: Racial Disparities in the Employment Consequences of Minimum Wage Increases.” Employment
Policies Institute Research Paper, 2011.
8.Joseph Sabia. “Failed Stimulus: Minimum Wage Increases and their Failure to Boost Gross Domestic Product.” Employment Policies Institute Research
Paper, 2010.
9.
EPI analysis of Census Bureau data.
10.See, for instance: Joseph Sabia and Robert Nielsen. “Can Raising the Minimum Wage Reduce Poverty and Hardship?” Employment Policies Institute
Research Paper, 2012.
11.Wiliam Even and David Macpherson. “Wage Growth Among Minimum Wage Workers.” Employment Polices Institute Research Paper, 2004.