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Does increasing the minimum wage reduce poverty in developing countries?

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  • T. H. Gindling

    (University of Maryland, USA, and IZA, Germany)

Abstract

Do minimum wage policies reduce poverty in developing countries? It depends. Raising the minimum wage could increase or decrease poverty, depending on labor market characteristics. Minimum wages target formal sector workers—a minority of workers in most developing countries—many of whom do not live in poor households. Whether raising minimum wages reduces poverty depends not only on whether formal sector workers lose jobs as a result, but also on whether low-wage workers live in poor households, how widely minimum wages are enforced, how minimum wages affect informal workers, and whether social safety nets are in place.

Suggested Citation

  • T. H. Gindling, 2014. "Does increasing the minimum wage reduce poverty in developing countries?," IZA World of Labor, Institute for the Study of Labor (IZA), pages 1-30, May.
  • Handle: RePEc:iza:izawol:journl:y:2014:n:30
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    References listed on IDEAS

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    1. Haroon Bhorat & Ravi Kanbur & Natasha Mayet, 2013. "The impact of sectoral minimum wage laws on employment, wages, and hours of work in South Africa," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-27, December.
    2. Neumark, David & Cunningham, Wendy & Siga, Lucas, 2006. "The effects of the minimum wage in Brazil on the distribution of family incomes: 1996-2001," Journal of Development Economics, Elsevier, vol. 80(1), pages 136-159, June.
    3. Gindling, T.H. & Terrell, Katherine, 2010. "Minimum Wages, Globalization, and Poverty in Honduras," World Development, Elsevier, vol. 38(6), pages 908-918, June.
    4. Alaniz, Enrique & Gindling, T.H. & Terrell, Katherine, 2011. "The impact of minimum wages on wages, work and poverty in Nicaragua," Labour Economics, Elsevier, vol. 18(S1), pages 45-59.
    5. David Neumark & DMark Schweitzer & DaWilliam Wascher, 2004. "Minimum Wage Effects throughout the Wage Distribution," Journal of Human Resources, University of Wisconsin Press, vol. 39(2).
    6. Lustig, N. & Mcleod, D., 1996. "Minimum Wages and Poverty in Developing Countries : Some Empirical Evidence," Papers 125, Brookings Institution - Working Papers.
    7. Wendy Cunningham, 2007. "Minimum Wages and Social Policy : Lessons from Developing Countries," World Bank Publications, The World Bank, number 6760, August.
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    Cited by:

    1. repec:kap:jbuset:v:149:y:2018:i:1:d:10.1007_s10551-016-3091-0 is not listed on IDEAS
    2. World Bank, 2016. "Republic of the Philippines Labor Market Review," World Bank Other Operational Studies 24768, The World Bank.
    3. David N Margolis, 2014. "By Choice and by Necessity: Entrepreneurship and Self-Employment in the Developing World," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 26(4), pages 419-436, September.
    4. Haroon Bhorat & Ravi Kanbur & Benjamin Stanwix, 2017. "Minimum Wages in Sub-Saharan Africa: A Primer," World Bank Research Observer, World Bank Group, vol. 32(1), pages 21-74.
    5. Haroon Bhorat & Tara Caetano & Benjamin Jourdan & Ravi Kanbur & Christopher Rooney & Benjamin Stanwix & Ingrid Woolard, 2016. "Investigating the Feasibility of a National Minimum Wage for South Africa," Working Papers 201601, University of Cape Town, Development Policy Research Unit.

    More about this item

    Keywords

    minimum wages; developing countries; poverty;

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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