Is a Guaranteed Living Wage a Good Anti-Poverty Policy?
40 Pages Posted: 23 Jul 2005
Date Written: June 2005
Abstract
Minimum wages are generally thought to be unenforceable in developing rural economies. But there is one solution - a workfare scheme in which the government acts as the employer of last resort. Is this a cost-effective policy against poverty? Using a microeconometric model of the casual labor market in rural India, the authors find that a guaranteed wage rate sufficient for a typical poor family to reach the poverty line would bring the annual poverty rate down from 34 percent to 25 percent at a fiscal cost representing 3-4 percent of GDP when run for the whole year. Confining the scheme to the lean season (three months) would bring the annual poverty rate down to 31 percent at a cost of 1.3 percent of GDP. While the gains from a guaranteed wage rate would be better targeted than a uniform (untargeted) cash transfer, the extra costs of the wage policy imply that it would have less impact on poverty.
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Paper statistics
Recommended Papers
-
How Relevant is Targeting to the Success of an Antipoverty Program?
-
Local Electoral Incentives and Decentralized Program Performance
By Alain De Janvry, Frederico Finan, ...
-
Di Bao: A Guaranteed Minimum Income in Urban China?
By Shaohua Chen, Martin Ravallion, ...
-
The Role of Community Involvement in Implementing Living Wage Ordinances
-
How can Food Subsidies Work Better? Answers from India and the Philippines
By Shikha Jha and Bharat Ramaswami
-
Seasonality and Wage Responsiveness in a Developing Agrarian Economy
By Sunil Kanwar
-
Pilferage from Opaque Food Subsidy Programs: Theory and Evidence
By Aashish Mehta and Shikha Jha
-
Option Values, Switches, and Wages: An Analysis of the Employment Guarantee Scheme in India
By Pasquale Lucio Scandizzo, Raghav Gaiha, ...