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Does increasing the minimum wage reduce poverty in developing countries?

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  • T. H. Gindling

    (University of Maryland, USA, and IZA, Germany)

Abstract

Do minimum wage policies reduce poverty in developing countries? It depends. Raising the minimum wage could increase or decrease poverty, depending on labor market characteristics. Minimum wages target formal sector workers—a minority of workers in most developing countries—many of whom do not live in poor households. Whether raising minimum wages reduces poverty depends not only on whether formal sector workers lose jobs as a result, but also on whether low-wage workers live in poor households, how widely minimum wages are enforced, how minimum wages affect informal workers, and whether social safety nets are in place.

Suggested Citation

  • T. H. Gindling, 2014. "Does increasing the minimum wage reduce poverty in developing countries?," IZA World of Labor, Institute of Labor Economics (IZA), pages 1-30, May.
    • Handle: RePEc:iza:izawol:journl:y:2014:n:30
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    1. Haroon Bhorat & Ravi Kanbur & Natasha Mayet, 2013. "The impact of sectoral minimum wage laws on employment, wages, and hours of work in South Africa," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-27, December.
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    Cited by:

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    3. Khurana, Saloni & Mahajan, Kanika & Sen, Kunal, 2023. "Minimum Wages and Changing Wage Inequality in India," IZA Discussion Papers 16600, Institute of Labor Economics (IZA).
    4. Mr. Christopher S Adam & Mr. Edward F Buffie, 2020. "The Minimum Wage Puzzle in Less Developed Countries: Reconciling Theory and Evidence," IMF Working Papers 2020/023, International Monetary Fund.
    5. Atif Khan Jadoon & Abeera Tanveer & Maria Faiq Javed & Ambreen Sarwar, 2021. "Minimum Wages and Poverty: A Cross-Country Analysis," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 11(8), pages 632-643, August.
    6. Amela Kurta & Nermin Oruč, 2020. "The Effect Of Increasing The Minimum Wage On Poverty And Inequality In Bosnia And Herzegovina," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 65(226), pages 121-138, July – Se.
    7. Romain Duval & Prakash Loungani, 2021. "Designing Labor Market Institutions in Emerging Market and Developing Economies: A Review of Evidence and IMF Policy Advice," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 63(1), pages 31-83, March.
    8. Haroon Bhorat & Ravi Kanbur & Benjamin Stanwix, 2017. "Minimum Wages in Sub-Saharan Africa: A Primer," The World Bank Research Observer, World Bank, vol. 32(1), pages 21-74.
    9. Haroon Bhorat & Tara Caetano & Benjamin Jourdan & Ravi Kanbur & Christopher Rooney & Benjamin Stanwix & Ingrid Woolard, 2016. "Investigating the Feasibility of a National Minimum Wage for South Africa," Working Papers 201601, University of Cape Town, Development Policy Research Unit.
    10. Carlo Lombardo & Lucía Ramírez Leira & Leonardo Gasparini, 2024. "Does the Minimum Wage Affect Wage Inequality? A Study for the Six Largest Latin American Economies," Journal of Development Studies, Taylor & Francis Journals, vol. 60(4), pages 494-510, April.
    11. Neumark, David & Munguía Corella, Luis Felipe, 2021. "Do minimum wages reduce employment in developing countries? A survey and exploration of conflicting evidence," World Development, Elsevier, vol. 137(C).
    12. David N Margolis, 2014. "By Choice and by Necessity: Entrepreneurship and Self-Employment in the Developing World," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 26(4), pages 419-436, September.
    13. Raymundo M. Campos-Vazquez & Gerardo Esquivel, 2023. "The Effect of the Minimum Wage on Poverty: Evidence from a Quasi-Experiment in Mexico," Journal of Development Studies, Taylor & Francis Journals, vol. 59(3), pages 360-380, March.
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    16. Bassier, Ihsaan & Ranchhod, Vimal, 2024. "Can minimum wages effectively reduce poverty under low compliance? A case study from the agricultural sector in South Africa," LSE Research Online Documents on Economics 122711, London School of Economics and Political Science, LSE Library.
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    19. World Bank, 2016. "Republic of the Philippines Labor Market Review," World Bank Publications - Reports 24768, The World Bank Group.

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    More about this item

    Keywords

    minimum wages; developing countries; poverty;
    All these keywords.

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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