Welfare Reform on the Web (June 2007): Minimum wage - overseas

The effectiveness of minimum-wage increases in reducing poverty: past, present, and future

R.V. Burkhauser and J.J. Sabia

Contemporary Economic Policy, vol. 25, 2007, p. 262-281

Beginning with the passage of the federal minimum wage as part of the US Fair Labor Standards Act 1938, its advocates have emphasised its importance as a poverty reduction tool. This article examines whether raising the minimum wage is an efficient policy tool for reducing poverty among the working poor and among single mothers in the labour force following the implementation of the 1996 Welfare Reform Act. The authors find little evidence that raising the minimum wage significantly reduces poverty rates among the working poor or single mothers. Most workers in minimum wage jobs live in nonpoor families, and most workers in poor families already earn more than the proposed federal minimum wage rate increase would pay them. Expanding the earned income tax credit would far more effectively reduce poverty, especially for single mothers.

The effects of multiple minimum wages throughout the labor market: the case of Costa Rica

T.H. Gindling and K. Terrell

Labour Economics, vol. 14, 2007, p. 485-511

This paper investigates the effects of legal minimum wages on employment and hours worked among workers covered by minimum wage legislation as well as those to whom it does not apply in Costa Rica. Using 1988-2000 micro data, the authors found that a 10% increase in minimum wages lowers employment in the covered sector by 1.09% and decreases the average number of hours worked by those remaining in the sector by about 0.6%. No significant impact on hours worked in the uncovered sector was found.

Minimum wages and social welfare expenditures: substitutes or complements?

J. Waltman and C. Marsh

Policy Studies, vol.28, 2007, p. 163-174

This article investigates the relationship between public social welfare expenditure policies and the minimum wage across the world. Analysis of OECD data shows that countries with high levels of expenditure on traditional social welfare are decidedly less likely to have any sort of minimum wage policy than lower spending nations. Nations without minimum wages are especially prone to look to active labour market policies to attack want.