Does Raising the Minimum Wage Help the Poor?

ANU Centre for Economic Policy Research Discussion Papers No. 501

22 Pages Posted: 16 Nov 2005

See all articles by Andrew Leigh

Andrew Leigh

Australian House of Representatives Parliament House; Centre for Applied Macroeconomic Analysis, ANU; IZA

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Date Written: November 2005

Abstract

What is the impact of raising the minimum wage on family incomes? To test this, I use data from Australia, a country whose minimum wages are among the highest in the world. Analyzing the characteristics of low wage workers, I find that those who earn near-minimum wages are disproportionately female, unmarried and young, without post-school qualifications and overseas born. About one-third of near-minimum wage workers are the sole worker in their household. Due to low labor force participation rates in the poorest households, minimum wage workers are most likely to be in middle-income households. Using various plausible parameters for the effect of minimum wages on hourly wages and employment, I estimate the impact of a minimum wage rise on inequality.

Keywords: Minimum wages, employment, wages, earnings, income distribution

JEL Classification: J23, J31, J38, D31

Suggested Citation

Leigh, Andrew, Does Raising the Minimum Wage Help the Poor? (November 2005). ANU Centre for Economic Policy Research Discussion Papers No. 501, Available at SSRN: https://ssrn.com/abstract=848948 or http://dx.doi.org/10.2139/ssrn.848948

Andrew Leigh (Contact Author)

Australian House of Representatives Parliament House ( email )

Canberra, 2600
Australia

Centre for Applied Macroeconomic Analysis, ANU ( email )

ANU College of Business and Economics
Canberra, Australian Capital Territory 0200
Australia

IZA ( email )

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