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Minimum Wage Effects on Poverty and Inequality

Author

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  • Alexandros Karakitsios

    (Athens University of Economics and Business)

  • Manos Matsaganis

    (Athens University of Economics and Business)

Abstract

Minimum wage effect on employment is one of the mostly studied fields in labour economics. Minimum wage is also considered as a redistributive tool but its efficiency is strongly doubted due to potential disemployment effect that may cause. In the present paper, redistributive ability of minimum wage is studied through microsimulation techniques and under several scenarios of employment elasticity. The results indicate that minimum wage can reduce poverty even under the presence of a disemployment effect. Though, this anti-poverty effect is limited as employment elasticity is more negative. Similarly, inequality decreases when minimum wage increases are adopted, but the redistributive effect is weaker when they cause job losses. The above indicate that minimum wage policies should be used with caution and always take into account any possible impact on employment.

Suggested Citation

  • Alexandros Karakitsios & Manos Matsaganis, 2018. "Minimum Wage Effects on Poverty and Inequality," DEOS Working Papers 1801, Athens University of Economics and Business.
    • Handle: RePEc:aue:wpaper:1801
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    More about this item

    Keywords

    minimum wages; unemployment; poverty; inequality;
    All these keywords.

    JEL classification:

    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J58 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Public Policy

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