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The (Non) Impact of Minimum Wages on Poverty: Regression and Simulation Evidence for Canada

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  • Michele Campolieti
  • Morley Gunderson
  • Byron Lee

Abstract

We estimate the effect of minimum wages on poverty for Canada using data from the Survey of Labour and Income Dynamics (SLID) for 1997 to 2007 and find that minimum wages do not have a statistically significant effect on poverty and this finding is robust across a number of specifications. Our simulation results, based on the March 2008 Labour Force Survey (LFS), find that only about 30 % of the net earnings gain from minimum wage increases goes to the poor while about 70 % “spill over” into the hands of the non-poor. Furthermore, we find that job losses are disproportionately concentrated on the poor. Our results highlight that, political rhetoric not-withstanding, minimum wages are poorly targeted as an anti-poverty device and are at best an exceedingly blunt instrument for dealing with poverty. Copyright Springer Science+Business Media, LLC 2012

Suggested Citation

  • Michele Campolieti & Morley Gunderson & Byron Lee, 2012. "The (Non) Impact of Minimum Wages on Poverty: Regression and Simulation Evidence for Canada," Journal of Labor Research, Springer, vol. 33(3), pages 287-302, September.
    • Handle: RePEc:spr:jlabre:v:33:y:2012:i:3:p:287-302
    DOI: 10.1007/s12122-012-9139-8
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    Cited by:

    1. David A. Green, 2014. "What Is a Minimum Wage For? Empirical Results and Theories of Justice," Canadian Public Policy, University of Toronto Press, vol. 40(4), pages 293-314, December.
    2. Sotomayor, Orlando J., 2021. "Can the minimum wage reduce poverty and inequality in the developing world? Evidence from Brazil," World Development, Elsevier, vol. 138(C).
    3. Atif Khan Jadoon & Abeera Tanveer & Maria Faiq Javed & Ambreen Sarwar, 2021. "Minimum Wages and Poverty: A Cross-Country Analysis," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 11(8), pages 632-643, August.
    4. Backhaus, Teresa & Müller, Kai-Uwe, 2019. "Does the German minimum wage benefit low income households?," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203585, Verein für Socialpolitik / German Economic Association.
    5. Nur Feriyanto & Dityawarman El Aiyubbi & Achmad Nurdany, 2020. "The Impact of Unemployment, Minimum Wage, and Real Gross Regional Domestic Product on Poverty Reduction in Provinces of Indonesia," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 10(10), pages 1088-1099, October.
    6. Natalia Mishagina & Claude Montmarquette, 2018. "The Demand for Economic Policies, Beliefs, and Willingness-to-Pay: The Case of the Minimum Wage Policy in Quebec," CIRANO Project Reports 2018rp-14, CIRANO.
    7. Young Cheol Jung & Adian McFarlane & Anupam Das, 2021. "The effect of minimum wages on consumption in Canada," The Economic and Labour Relations Review, , vol. 32(1), pages 65-89, March.
    8. Teresa Backhaus & Kai-Uwe Müller, 2019. "Does the German Minimum Wage Help Low Income Households?: Evidence from Observed Outcomes and the Simulation of Potential Effects," Discussion Papers of DIW Berlin 1805, DIW Berlin, German Institute for Economic Research.
    9. Leila Sabokkhiz & Fatma Guven Lisaniler & Ikechukwu D. Nwaka, 2021. "Minimum Wage and Household Consumption in Canada: Evidence from High and Low Wage Provinces," Sustainability, MDPI, vol. 13(12), pages 1-20, June.
    10. Aleksandravičienė Akvilė & Barišauskaitė Gintarė & Ruzveltaitė Lina, 2023. "Poverty Reduction: Analysis of Factors Affecting Poverty in Lithuania," Management of Organizations: Systematic Research, Sciendo, vol. 89(1), pages 1-14, June.
    11. Dany Brouillette & Calista Cheung & Daniel Gao & Olivier Gervais, 2017. "The Impacts of Minimum Wage Increases on the Canadian Economy," Staff Analytical Notes 17-26, Bank of Canada.
    12. Kapelyuk Sergey, 2014. "Impact of minimum wage on income distribution and poverty in Russia," EERC Working Paper Series 14/03e, EERC Research Network, Russia and CIS.

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    More about this item

    Keywords

    Minimum wages; Poverty; Canada; J30; J38; J80; J13;
    All these keywords.

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J80 - Labor and Demographic Economics - - Labor Standards - - - General
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth

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