The Interaction Between the Minimum Wage and the Federal EITC

Source: Andrew P. Schaefer, Jessica A. Carson, Marybeth J. Mattingly, Andrew Wink, University of New Hampshire, Carsey School of Public Policy, November 13, 2018

Increases in the minimum wage are widely assumed to be beneficial for low-income workers, but it is important to consider the effect an increase might have on eligibility for other benefits, particularly the federal Earned Income Tax Credit (EITC). This fact sheet examines the interaction between the minimum wage and the EITC to determine whether a minimum wage increase would produce gains in the sum of earnings plus EITC dollars for low-income workers

Key Findings:

For workers earning the minimum wage, an increase would result in higher income; none would experience a lower net income due to changes in the federal EITC credit (though this may be offset by loss of other safety net program benefits).

For some family types, increased income would come primarily from a higher minimum wage; for others, gains would also come from the higher-value federal EITC triggered by their higher earnings.