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It is a good example of how theory can be applied to the real world. A minimum wage increases the wages of the low paid, but does it actually reduce relative poverty? This is a matter of debate because the effects of a minimum wage may not be felt by the poorest.
How a minimum wage reduces poverty Increases wages of lowest pay. This reduces relative poverty of the low paid. It also perhaps, reduces need for goverment benefits, such as, income support Counteracts Monopsony Power. In some cases a minimum wage can actually reduce unemployment.
The poorest are on government benefits; therefore, they do not benefit from a minimum wage.
Many workers receiving the minimum wage are second income earners or students. Therefore, the benefits of a minimum wage can often accrue to middle class families. Minimum wages can lead to a fall in employment. Unemployment can be the biggest cause of poverty.
Minimum wage legislation may encourage people to work on the black market, and therefore, avoid all government legislation. Evidence from America suggest effect is limited. See this paper by James Sherk: Raising minimum wage does not reduce poverty "The obvious policy implication is that minimum wage laws cannot be justified as a poverty reducing device.
Vedder and Dr E. Galloway  See Essay: Does a Minimum Wage Reduce Poverty? For example, the classical analysis of minimum wages suggests that a minimum wage above the equilibrium will cause unemployment. However, in practice, we see that increasing the National Minimum Wage may not lead to unemployment.
There are various economic reasons to explain why this might occur. The most convincing reasons in the UK include:Minimum wage is a heated topic all over the world.
In Japan, the minimum hourly wage is yen or $, and according to Bloomberg, it “is about enough to buy a bowl of noodles.” Although a % bump was added in , that didn’t help much with inflation.
Feb 09, · The minimum wage is a battlefield in a larger political fight between Democrats and Republicans — dating back to the New Deal legislation that instituted the first minimum wage in — over.
For example, in the UK the minimum wage has increased from £ in to £; however, during this period unemployment has fallen. There are various . minimum wage in , when it was raised from $8 to $ over a year, the Fraser Institute claimed the increase would result in a staggering loss of over 52, jobs.
The technical definition of a minimum wage is the lowest amount of money that an employee can be paid in exchange for their labor. Although minimum wages are the legal norm across the world, there are a variety of opinions on what they should be that vary across countries.
The authors estimate the employment effects of changes in national minimum wages using a pooled cross-section time-series data set comprising 17 OECD countries for the period – The average effects they find are consistent with the view that minimum wages cause employment losses among youths.
However, the evidence also shows considerable variation across countries.