The optimal minimum wage for poverty minimization

Hideaki Goto

Research output: Contribution to journalArticle

Abstract

This paper characterizes the poverty minimizing minimum wage, and shows how it varies as productivity, inequality and market competitiveness change. We show that the optimal minimum wage is equal to the competitive wage only in special cases. In general, the former is higher than the latter. Thus, poverty minimization does not coincide with employment maximization. We also show that the optimal minimum wage always rises with productivity and, under certain conditions, falls with competitiveness and inequality. Furthermore, the higher the competitiveness and inequality, the more the optimal wage rises with productivity.

Original languageEnglish
Pages (from-to)192-208
Number of pages17
JournalBulletin of Economic Research
Volume64
Issue number2
DOIs
Publication statusPublished - 2012 Apr

Keywords

  • Inequality
  • Labour market competitiveness
  • Minimum wages
  • Poverty
  • Productivity

ASJC Scopus subject areas

  • Economics and Econometrics

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