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

  • Tim Maloney

    (Department of Economics, Auckland University of Technology, Auckland, New Zealand.)

  • Gail Pacheco

    ()

    (Department of Economics, Auckland University of Technology, Auckland, New Zealand.)

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://www.aut.ac.nz/__data/assets/pdf_file/0015/228012/Economics-WP-2011-03.pdf
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Paper provided by Auckland University of Technology, Department of Economics in its series Working Papers with number 2011-03.

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Length: 40 pages
Date of creation: Sep 2011
Date of revision:
Handle: RePEc:aut:wpaper:201103
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  1. Hyslop, Dean & Stillman, Steven, 2004. "Youth Minimum Wage Reform and the Labour Market," IZA Discussion Papers 1091, Institute for the Study of Labor (IZA).
  2. 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.
  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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