Who Benefits and Who Pays for Minimum Wage Increase in California?: A Perspective on Proposition 210 (Essays in Public Policy #78)

Description

Imagine the following proposition: to provide $1.2 billion of income support for working poor families, tax each California family an average of $107 per year. Impose this tax as an increase in the sales tax (including a tax on food), where as the tax rate rises a family income falls. The money thus collected will be given to about one in four families, regardless of income level. Although designed for the working poor, families in the bottom 40 percent of the income distribution will receive only 44 percent of the benefits. Out of this 44 percent, less than half will go to families with children under eighteen. Would California voters support this proposition? Apparently so, because in 1996 voters passed Proposition 210, the minimum wage initiative, which is effectively this proposition, assuming that the wage increase does not put people out of work.