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Does Raising the Minimum Wage Help the Poor?

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  • Andrew Leigh

Abstract

What is the impact of raising the minimum wage on family incomes? Analysing the characteristics of low wage workers, I find that those who earn near-minimum wages are disproportionately female, unmarried and young, without post-school qualifications and overseas born. About one-third of near-minimum wage workers are the sole worker in their household. Due to low labour force participation rates in the poorest households, minimum wage workers are most likely to be in middle-income households. Using various plausible parameters for the effect of minimum wages on hourly wages and employment, I estimate the impact of a minimum wage rise on inequality.

Suggested Citation

  • Andrew Leigh, 2005. "Does Raising the Minimum Wage Help the Poor?," CEPR Discussion Papers 501, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    • Handle: RePEc:auu:dpaper:501
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    File URL: https://www.cbe.anu.edu.au/researchpapers/CEPR/DP501.pdf
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    References listed on IDEAS

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    1. David Neumark & Mark Schweitzer & William Wascher, 2005. "The Effects of Minimum Wages on the Distribution of Family Incomes: A Nonparametric Analysis," Journal of Human Resources, University of Wisconsin Press, vol. 40(4), pages 867-894.
    2. Harding, Don & Harding, Glenys, 2004. "Minimum wages in Australia: an analysis of the impact on small and medium sized businesses," MPRA Paper 25, University Library of Munich, Germany.
    3. Andrew Leigh, 2003. "Employment Effects of Minimum Wages: Evidence from a Quasi‐Experiment," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 36(4), pages 361-373, December.
    4. 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).
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    Cited by:

    1. Wang‐Sheng Lee & Sandy Suardi, 2011. "Minimum Wages and Employment: Reconsidering the Use of a Time Series Approach as an Evaluation Tool," British Journal of Industrial Relations, London School of Economics, vol. 49(Supplemen), pages 376-401, July.
    2. Tim Maloney & Gail Pacheco, 2010. "Interpreting Changes in Minimum Wage Incidence Rates," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 13(3), pages 219-240.
    3. Benassi, Chiara., 2011. "The implementation of minimum wage : challenges and creative solutions," ILO Working Papers 994629883402676, International Labour Organization.
    4. Joseph J. Sabia, 2008. "Minimum wages and the economic well-being of single mothers," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 27(4), pages 848-866.
    5. Alexandros Karakitsios & Manos Matsaganis, 2018. "Minimum Wage Effects on Poverty and Inequality," DEOS Working Papers 1801, Athens University of Economics and Business.
    6. Roger Wilkins & Mark Wooden, 2011. "Measuring Minimum Award Wage Reliance in Australia: The HILDA Survey Experience," Melbourne Institute Working Paper Series wp2011n11, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    7. Meghan J. Millea & Jon P. Rezek & Brian Shoup & Joshua Pitts, 2017. "Minimum Wages in a Segmented Labor Market: Evidence from South Africa," Journal of Labor Research, Springer, vol. 38(3), pages 335-359, September.
    8. Jeff Borland & Michael Coelli, 2016. "Labour Market Inequality in Australia," The Economic Record, The Economic Society of Australia, vol. 92(299), pages 517-547, December.
    9. Paul Frijters & Robert Gregory, 2006. "From Golden Age to Golden Age: Australia's ‘Great Leap Forward’?," The Economic Record, The Economic Society of Australia, vol. 82(257), pages 207-224, June.
    10. Alfred Michael Dockery & Richard Seymour & Rachel Ong, 2010. "Life on the Minimum Wage in Australia: An Empirical Investigation," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 13(1), pages 1-26.
    11. James Bishop, 2018. "The Effect of Minimum Wage Increases on Wages, Hours Worked and Job Loss," RBA Research Discussion Papers rdp2018-06, Reserve Bank of Australia.
    12. 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.
    13. repec:ilo:ilowps:462988 is not listed on IDEAS
    14. Noel Gaston & Gulasekaran Rajaguru, 2009. "The Long‐run Determinants of Australian Income Inequality," The Economic Record, The Economic Society of Australia, vol. 85(270), pages 260-275, September.
    15. 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; employment; wages; earnings; income distribution;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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