We study the effects, over many decades, of minimum wages, living wages, the Earned Income Tax Credit, and welfare (and welfare reform) on disadvantaged neighborhoods. Using Census data, we identify tracts that are initially disadvantaged in terms of either a high share with low education, or a high share black. We then estimate the long-run effects of these alternative policies on key economic indicators of economic self-sufficiency – in particular poverty and the receipt of public assistance. Our identification strategy largely relies on state-level and federal-level policy variation that has differential impacts on more- vs. less-advantaged tracts within a state, which allows us to flexibly allow for state-specific shocks correlated with policy changes.
We fail to find evidence of beneficial long-run effects of minimum wages in disadvantaged areas. In the longer-run, employment effects are negative, and there is no evidence that higher minimum wages reduce poverty or lower the share of household on public assistance.
In contrast, we find evidence of longer-run beneficial effects of a more generous EITC. There is some evidence that in the longer run the EITC increases employment and reduces poverty. And there is strong evidence that a higher EITC reduces the share of families on public assistance.