The minimum wage paradox

A Social Benefits Calculator reveals that an increase in the minimum wage has a small impact on income for many poor people. (Winston Salem Journal, June 2021) Reductions in "social benefits such as food stamps (SNAP benefits) or child care or housing assistance" and increases in taxes reduce the impact of the increase in wages. Here is a money quote.

"Let’s use the calculator and create a hypothetical example: a full-time working parent earning the minimum wage, who is unmarried with two children in subsidized day care. ... after his or her wages more than double from $7.25 an hour to $15 an hour, earnings rise from $1,160 to $2,400, or a $1,240 change.

"... But after subtracting the decrease in benefits and higher taxes, that $1,240 increase erodes to just a $199 net improvement, or just a 16% change.

"... Through multiple scenarios using the CSEM calculator, I have found long ranges of income where work barely pays — what I call “disincentive deserts” in my published research. In some cases, individuals are actually worse off by accepting wage increases because of larger drop-offs in benefits, in what are called 'benefits cliffs.'”

The examples highlight the disincentives to earning more income that many poor people face and may explain why some poor people do not try to "pull themselves up by their bootstraps". Why work more when the tax man takes away much of the gain?