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Assessing the Possible Antipoverty Effects of Recent Rises in Age-Specific Minimum Wages in New Zealand

  • Tim Maloney
  • Gail Pacheco

Real minimum wages increased by nearly 33% for adults and 123% for teenagers in New Zealand between 1999 and 2008. Where fewer than 2% of workers were being paid a minimum wage at the outset of this sample period, now more than 8% of adult workers and 60% of teenage workers are receiving hourly earnings close to the minimum wage. These policy changes provide a unique opportunity to estimate the effects of the minimum wage on the characteristics of these workers and their location across the income distribution. We provide some evidence on the likely consequences of these rising minimum wages on the poverty rate in New Zealand. Although minimum wage workers are more likely to live in the poorest households, they are relatively widely dispersed throughout the income distribution. This is particularly true of teenage minimum wage workers. Furthermore, low-income households often do not contain any working members. We estimate that a 10% increase in minimum wages, even without any offsetting reduction in earnings due to a loss in employment or hours of work, would lower the relative poverty rate by less than one-tenth of a percentage point.

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File URL: http://hdl.handle.net/10.1111/roiw.2012.58.issue-4
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Article provided by International Association for Research in Income and Wealth in its journal Review of Income and Wealth.

Volume (Year): 58 (2012)
Issue (Month): 4 (December)
Pages: 648-674

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Handle: RePEc:bla:revinw:v:58:y:2012:i:4:p:648-674
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  1. Marta Pascual & David Cantarero & José Sarabia, 2005. "Income Inequality and Health: Do the Equivalence Scales Matter?," Atlantic Economic Journal, International Atlantic Economic Society, vol. 33(2), pages 169-178, June.
  2. Dean Hyslop & Steven Stillman, 2004. "Youth Minimum Wage Reform and the Labour Market," Treasury Working Paper Series 04/03, New Zealand Treasury.
  3. Brown, Charles & Gilroy, Curtis & Kohen, Andrew, 1982. "The Effect of the Minimum Wage on Employment and Unemployment," Journal of Economic Literature, American Economic Association, vol. 20(2), pages 487-528, June.
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