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 labordemand, 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.
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.:
- 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.
- Freeman, Richard B, 1996. "The Minimum Wage as a Redistributive Tool," Economic Journal, Royal Economic Society, vol. 106(436), pages 639-49, May.
- David Neumark & William Wascher, 1997.
"Do Minimum Wages Fight Poverty?,"
NBER Working Papers
6127, 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).
- 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, 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.
- 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.
- Nora Lustig & Darryl McLeod, 1996. "Minimum Wages and Poverty in Developing Countries: Some Evidence," Discussion Papers 125, Brookings Institution International Economics.
When requesting a correction, please mention this item's handle: RePEc:ess:wpaper:id:169. 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: (Padma Prakash)
If references are entirely missing, you can add them using this form.