Minimum Wages And Poverty
AbstractTextbook analysis tells us that in a competitive labor market, the introduction of a minimum wage above the competitive equilibrium wage will cause unemployment. This paper makes two contributions to the basic theory of the minimum wage. First, we analyze the effects of a higher minimum wage in terms of poverty rather than in terms of unemployment. Second, we extend the standard textbook model to allow for incomesharing between the employed and the unemployed. We find that there are situations in which a higher minimum wage raises poverty, others where it reduces poverty, and yet others in which poverty is unchanged. We characterize precisely how the poverty effect depends on four parameters: the degree of poverty aversion, the elasticity of labordemand, the ratio of the minimum wage to the poverty line, and the extent of incomesharing.Thus, shifting the perspective from unemployment to poverty leads to a considerable enrichment of the theory of the minimum wage.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by eSocialSciences in its series Working Papers with number id:169.
Date of creation: Aug 2005
Date of revision:
Note: Working Papers
Contact details of provider:
Web page: http://www.esocialsciences.org
poverty; minimum wage; employment; unemployment; incomesharing;
Other versions of this item:
- D6 - Microeconomics - - Welfare Economics
- I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
- J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Edward M. Gramlich, 1976. "Impact of Minimum Wages on Other Wages, Employment, and Family Incomes," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 7(2), pages 409-462.
- Stephan Klasen & Ingrid Woolard, 2001.
"Surviving Unemployment without State Support: Unemployment and Household Formation in South Africa,"
CESifo Working Paper Series
533, CESifo Group Munich.
- Stephan Klasen & Ingrid Woolard, 2009. "Surviving Unemployment Without State Support: Unemployment and Household Formation in South Africa," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 18(1), pages 1-51, January.
- Stephen Klasen & Ingrid Woolard, 2005. "Surviving unemployment without state support: Unemployment and household formation in South Africa," SALDRU/CSSR Working Papers 129, Southern Africa Labour and Development Research Unit, University of Cape Town.
- Klasen, Stephan & Woolard, Ingrid, 2000. "Surviving Unemployment without State Support: Unemployment and Household Formation in South Africa," IZA Discussion Papers 237, Institute for the Study of Labor (IZA).
- Mincer, Jacob, 1976. "Unemployment Effects of Minimum Wages," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages S87-104, August.
- Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-66, May.
- Scott Adams & David Neumark, 2005.
"The Effects of Living Wage Laws: Evidence from Failed and Derailed Living Wage Campaigns,"
NBER Working Papers
11342, National Bureau of Economic Research, Inc.
- Adams, Scott & Neumark, David, 2005. "The effects of living wage laws: Evidence from failed and derailed living wage campaigns," Journal of Urban Economics, Elsevier, vol. 58(2), pages 177-202, September.
- Scott Adams & David Neumark, 2004. "The Effects of Living Wage Laws: Evidence From Failed and Derailed Living Wage Campaigns," PPIC Working Papers 2004.12, Public Policy Institute of California.
- Adams, Scott & Neumark, David, 2005. "The Effects of Living Wage Laws: Evidence from Failed and Derailed Living Wage Campaigns," IZA Discussion Papers 1566, Institute for the Study of Labor (IZA).
- David Neumark & William Wascher, 2002.
"Do Minimum Wages Fight Poverty?,"
Western Economic Association International, vol. 40(3), pages 315-333, July.
- Lustig, N. & Mcleod, D., 1996. "Minimum Wages and Poverty in Developing Countries : Some Empirical Evidence," Papers 125, Brookings Institution - Working Papers.
- Freeman, Richard B, 1996. "The Minimum Wage as a Redistributive Tool," Economic Journal, Royal Economic Society, vol. 106(436), pages 639-49, May.
- Nora Lustig & Darryl McLeod, 1996. "Minimum Wages and Poverty in Developing Countries: Some Evidence," Discussion Papers 125, Brookings Institution International Economics.
- Fields, Gary S., 1997. "Wage floors and unemployment: A two-sector analysis," Labour Economics, Elsevier, vol. 4(1), pages 85-91, March.
- Bhorat, Haroon & Kanbur, Ravi, 2006.
"Poverty and Well-being in Post-Apartheid South Africa: An Overview of Data, Outcomes and Policy,"
127035, Cornell University, Department of Applied Economics and Management.
- Haroon Bhorat & Ravi Kanbur, 2005. "Poverty and Well-being in Post-Apartheid South Africa: An Overview of Data, Outcomes and Policy," Working Papers 05101, University of Cape Town, Development Policy Research Unit.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Padma Prakash).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.