The Optimal Minimum Wage for Poverty Minimization

Posted: 4 Apr 2012

See all articles by Hideaki Goto

Hideaki Goto

International University of Japan - Graduate School of International Relations

Date Written: April 2012

Abstract

This paper characterizes the poverty minimizing minimum wage, and shows how it varies as productivity, inequality and market competitiveness change. We show that the optimal minimum wage is equal to the competitive wage only in special cases. In general, the former is higher than the latter. Thus, poverty minimization does not coincide with employment maximization. We also show that the optimal minimum wage always rises with productivity and, under certain conditions, falls with competitiveness and inequality. Furthermore, the higher the competitiveness and inequality, the more the optimal wage rises with productivity.

Keywords: inequality, labour market competitiveness, minimum wages, poverty, productivity

JEL Classification: I38, J38

Suggested Citation

Goto, Hideaki, The Optimal Minimum Wage for Poverty Minimization (April 2012). Bulletin of Economic Research, Vol. 64, Issue 2, pp. 192-208, 2012. Available at SSRN: https://ssrn.com/abstract=2034083 or http://dx.doi.org/10.1111/j.1467-8586.2010.00375.x

Hideaki Goto (Contact Author)

International University of Japan - Graduate School of International Relations ( email )

777 Kokusai-Cho
Minami Uonuma Shi, Niigata-ken 949-7277
Japan

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