Minimum Wages and Poverty
Textbook 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 labor demand, 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.
|Date of creation:||2005|
|Date of revision:|
|Contact details of provider:|| Postal: Warren Hall, Ithaca NY 14853|
Web page: http://aem.cornell.edu/
More information through EDIRC
References listed on IDEAS
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.:
- David Neumark & William Wascher, 1997.
"Do Minimum Wages Fight Poverty?,"
NBER Working Papers
6127, National Bureau of Economic Research, Inc.
- Fields, Gary S., 1997. "Wage floors and unemployment: A two-sector analysis," Labour Economics, Elsevier, vol. 4(1), pages 85-91, March.
- 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.
- Mincer, Jacob, 1976.
"Unemployment Effects of Minimum Wages,"
Journal of Political Economy,
University of Chicago Press, vol. 84(4), pages S87-104, August.
- 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," Journal of Urban Economics, Elsevier, vol. 58(2), pages 177-202, September.
- 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," IZA Discussion Papers 1566, Institute for the Study of Labor (IZA).
- Daniel S. Hamermesh, 1993. "Labor Demand and the Source of Adjustment Costs," NBER Working Papers 4394, National Bureau of Economic Research, Inc.
- Nora Lustig & Darryl McLeod, 1996. "Minimum Wages and Poverty in Developing Countries: Some Evidence," Discussion Papers 125, Brookings Institution International Economics.
- Alan B. Krueger & David Card, 2000. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania: Reply," American Economic Review, American Economic Association, vol. 90(5), pages 1397-1420, December.
- Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-66, May.
- 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.
- 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.
- 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).
- 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.
- repec:sae:ilrrev:v:49:y:1996:i:3:p:547-552 is not listed on IDEAS
- William Wascher & David Neumark, 2000. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania: Comment," American Economic Review, American Economic Association, vol. 90(5), pages 1362-1396, December.
When requesting a correction, please mention this item's handle: RePEc:ags:cudawp:127086. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search)
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.