Question

Based on the readings, do you think that minimum wage laws affect overall poverty? Explain.

Answer 1

                           “Minimum wages have been defined as “the minimum amount of remuneration that an employer is required to pay wage earners for the work performed during a given period, which cannot be reduced by collective agreement or an individual contract”

The purpose of minimum wages is to protect workers against unduly low pay. They help ensure a just and equitable share of the fruits of progress to all, and a minimum living wage to all who are employed and in need of such protection. Minimum wages can also be one element of a policy to overcome poverty and reduce inequality, including those between men and women, by promoting the right to equal remuneration for work of equal value.

                             Whether measured by the poverty rate or by the earnings of low-income families, the minimum wage does not help the poor. Most estimates suggest that each 10 percent increase in the minimum wage reduces employment in affected groups of workers by roughly 2 percent.This leaves poor families actually worse off. Despite supporters' good intentions, a higher minimum wage will not reduce poverty. This is true for three main reasons.

• First, the only workers who benefit from a higher minimum wage are those who actually earn that higher wage. Raising the minimum wage reduces many workers' job opportunities and working hours.
• Second, few minimum-wage earners actually come from poor households.
• Third, the majority of poor do not work at all, for any wage, so raising the minimum wage does not help them.

                            Many economists have examined the evidence and come to the surprising conclusion that the minimum wage does not reduce poverty. Ohio University economists Richard Vedder and Lowell Gallaway examined the effect that increases in the minimum wage had on the overall poverty rate in the United States and on the poverty rates for groups like minorities and teenagers that might especially benefit from higher minimum wages.They found that the minimum wage had no statistically detectable effect on poverty rates. Other researchers have approached the evidence in different ways and reached the same conclusion. For example, economists David Neumark of the University of California-Irvine, Mark Schweitzer of the Federal Reserve Bank of Cleveland, and William Wascher of the Federal Reserve Board examined how the minimum wage affects the incomes of families living near the poverty line. In a series of papers, they repeatedly reached the same conclusion as Vedder and Gallaway: A higher minimum wage does not lift low-income families out of poverty. Whether measured by the poverty rate or by the earnings of low-income families, the minimum wage does not help the poor.

                               Higher Minimum Wages Cost jobs and Working Hours. A major reason why the minimum wage is such an ineffective anti-poverty tool is that minimum-wage hikes cause businesses to reduce the number of workers they hire and the hours they ask their employees to work. Most estimates suggest that each 10 percent increase in the minimum wage reduces employment in affected groups of workers by roughly 2 percent. A higher minimum wage helps only those workers who actually wind up earning that wage and further disadvantages lower-income workers, who suffer fewer job opportunities and working hours. Though intended to help low-income families get ahead, the minimum wage instead costs some their jobs and others hours at work. This leaves poor families actually worse off.

Another reason for the failure of higher minimum wages to reduce poverty is that the vast majority of minimum-wage workers do not live in poverty. Much of the benefit of a higher minimum wage accrues to suburban teenagers and college students, not the heads of poor families. A majority of minimum-wage earners are between the ages of 16 and 24, and over three-fifths of minimum-wage earners work part-time

                                       Extensive research shows that the minimum wage does little to reduce poverty. While this may appear counterintuitive, deeper analysis reveals three reasons behind the minimum wage's ineffectiveness.

First, a higher minimum wage causes employers to cut back on both the number of workers they hire and their employees' working hours.

Second, the beneficiaries of higher minimum wages are unlikely to be poor because most minimum-wage earners are not poor.

Finally, few individuals living in poverty work at minimum-wage jobs or any job.