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Can minimum wages contribute to poverty reduction in poor countries?

  • Stephen Devereux

    (Institute of Development Studies, University of Sussex, Brighton, UK)

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    Minimum wage legislation aims to reduce poverty by raising the wages of the poorest workers towards or above the poverty line. Despite their intuitive appeal, minimum wages are controversial. The sceptics' argument that raising wages will create disemployment is compounded by the difficulties of enforcing compliance, particularly in poor countries with large informal sectors and weak public administrations. This paper draws on the 'new economics' of the minimum wage, and reviews evidence from several countries suggesting that positive impacts are achievable with negligible side-effects. The paper concludes by making a case for introducing selective minimum wages on Uganda's agricultural estates. Copyright © 2005 John Wiley & Sons, Ltd.

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    File URL: http://hdl.handle.net/10.1002/jid.1183
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    Article provided by John Wiley & Sons, Ltd. in its journal Journal of International Development.

    Volume (Year): 17 (2005)
    Issue (Month): 7 ()
    Pages: 899-912

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    Handle: RePEc:wly:jintdv:v:17:y:2005:i:7:p:899-912
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    1. Mark B. Stewart, 2004. "The employment effects of the national minimum wage," Economic Journal, Royal Economic Society, vol. 114(494), pages C110-C116, 03.
    2. William F. Maloney & Jairo Nunez Mendez, 2003. "Measuring the Impact of Minimum Wages: Evidence from Latin America," NBER Working Papers 9800, National Bureau of Economic Research, Inc.
    3. Lustig, N. & Mcleod, D., 1996. "Minimum Wages and Poverty in Developing Countries : Some Empirical Evidence," Papers 125, Brookings Institution - Working Papers.
    4. Orley Ashenfelter & Robert Smith, 1977. "Compliance with the Minimum Wage Law," Working Papers 478, Princeton University, Department of Economics, Industrial Relations Section..
    5. Bell, Linda A., 1995. "The impact of minimum wages in Mexico and Colombia," Policy Research Working Paper Series 1514, The World Bank.
    6. Strobl, Eric & Walsh, Frank, 2003. "Minimum Wages and Compliance: The Case of Trinidad and Tobago," Economic Development and Cultural Change, University of Chicago Press, vol. 51(2), pages 427-50, January.
    7. Robin Boadway & Katherine Cuff, 1999. "A Minimum Wage Can Be Welfare-Improving and Employment-Enhancing," Cahiers de recherche CREFE / CREFE Working Papers 72, CREFE, Université du Québec à Montréal.
    8. Ellis, Frank & Bahiigwa, Godfrey, 2003. "Livelihoods and Rural Poverty Reduction in Uganda," World Development, Elsevier, vol. 31(6), pages 997-1013, June.
    9. Haroon Bhorat, 2000. "Are Wage Adjustments an Effective Mechanism for Poverty Alleviation?: Some Simulations for Domestic and Farm Workers," Working Papers 00041, University of Cape Town, Development Policy Research Unit.
    10. Alatas, Vivi & Cameron, Lisa, 2003. "The impact of minimum wages on employment in a low income country : an evaluation using the difference-differences approach," Policy Research Working Paper Series 2985, The World Bank.
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