The Intriguing Relation between Adult Minimum Wage and Child Labor

19 Pages Posted: 20 Apr 2016

See all articles by Kaushik Basu

Kaushik Basu

Cornell University - Department of Economics; IZA Institute of Labor Economics; Brookings Institution

Date Written: August 1999

Abstract

Raising adult wages through a minimum wage law can in some circumstances have the paradoxical effect of increasing the amount of child labor. In other words, using minimum wage legislation as a form of international labor standard can exacerbate problems of child labor. According to International Labour Organisation estimates, roughly 250 million children work full or part time, most of them in developing countries. Because most parents send their children to work only when compelled by poverty to do so, one would expect an increase in adult wages to reduce the amount of child labor. But an increase in adult wages achieved through a minimum wage law sometimes has a paradoxical effect. It can, for instance, cause some adults to be unemployed and force them to send their children to work. This in turn displaces more adult labor, with the result that more children are sent to work. Basu analyzes this process with a view to predicting the incidence of child labor. He shows that, for appropriate parametric configurations, child labor may rise or fall as the adult minimum wage is raised.

This paper - a product of the Office of the Senior Vice President, Development Economics - is part of a larger effort in the Bank to promote understanding of the causes of child labor. The study was funded by the Bank's Research Support Budget under the research project Literacy and Child Labor (RPO 683-07).

Keywords: minimum wage, child labour, unemployment

JEL Classification: D10, J64

Suggested Citation

Basu, Kaushik, The Intriguing Relation between Adult Minimum Wage and Child Labor (August 1999). World Bank Policy Research Working Paper No. 2173. Available at SSRN: https://ssrn.com/abstract=629101

Kaushik Basu (Contact Author)

Cornell University - Department of Economics ( email )

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IZA Institute of Labor Economics

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Brookings Institution ( email )

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