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Low Pay and Household Poverty

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  • Brian Nolan

    ()

  • Ive Marx

    ()

Abstract

Low pay is conventionally measured in terms of the gross earnings of the individual, related to benchmarks derived from the distribution of earnings such as half or two-thirds of the median. Poverty status, on the other hand, is usually assessed on the basis of the disposable income of the household, adjusted for size and composition. The relationship between the two - low pay and poverty - is by no means straightforward, but improving our understanding of it is critical to policy formulation. In this paper we draw on two data sources to investigate what that relationship looks like empirically in industrialized countries: the Luxembourg Income Study database and the European Community Household Panel. The extent of overlap between low pay and poverty is found to be often rather more limited at an aggregate level than might generally be expected, but there is also some variation across countries. These results are based on snapshots from cross-section data, and the importance of a dynamic perspective in this context is emphasized. In conclusion, some of the policy implications are explored.

Suggested Citation

  • Brian Nolan & Ive Marx, 1999. "Low Pay and Household Poverty," LIS Working papers 216, LIS Cross-National Data Center in Luxembourg.
  • Handle: RePEc:lis:liswps:216
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    References listed on IDEAS

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    1. Timothy Smeeding & Gunther Schmaus & Brigitte Buhmann & Lee Rainwater, 1988. "Equivalence Scales, Well-Being, Inequality and Poverty: Sensitivity Estimates Across Ten Countries Using the LIS Database," LIS Working papers 17, LIS Cross-National Data Center in Luxembourg.
    2. Atkinson, A B, 1987. "On the Measurement of Poverty," Econometrica, Econometric Society, vol. 55(4), pages 749-764, July.
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    5. Rebecca M. Blank & David Card & Philip K. Robins, 1999. "Financial Incentives for Increasing Work and Income Among Low-Income Families," JCPR Working Papers 69, Northwestern University/University of Chicago Joint Center for Poverty Research.
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    11. Freeman, Richard B, 1996. "The Minimum Wage as a Redistributive Tool," Economic Journal, Royal Economic Society, vol. 106(436), pages 639-649, May.
    12. Whitehouse, Edward, 1996. "Designing and Implementing In-Work Benefits," Economic Journal, Royal Economic Society, vol. 106(434), pages 130-141, January.
    13. Coulter, Fiona A E & Cowell, Frank A & Jenkins, Stephen P, 1992. "Equivalence Scale Relativities and the Extent of Inequality and Poverty," Economic Journal, Royal Economic Society, vol. 102(414), pages 1067-1082, September.
    14. Richard V. Burkhauser & T. Aldrich Finegan, 1989. "The minimum wage and the poor: The end of a relationship," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 8(1), pages 53-71.
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