Minimum Wages and Social Policy: Lessons from Developing Countries

Minimum Wages and Social Policy: Lessons from Developing Countries

Minimum Wages and Social Policy: Lessons from Developing Countries

Minimum Wages and Social Policy: Lessons from Developing Countries

Synopsis

"Minimum Wages and Social Policy systematically explores the minimum wage as a policy tool for decreasing poverty and redressing social inequities in the developing country context. Offering evidence from both detailed individual country studies and new analysis from across the Latin American and Caribbean region, this book examines the impact of a minimum wage on income, employment, poverty, income distribution, and government budgets in the context of economies with large informal sectors and predominantly unskilled workforces. Minimum Wages and Social Policy will be of great interest to readers working in the areas of social analysis and policy, poverty reduction strategies, and labor market and social protection policies."

Excerpt

The minimum wage is an attractive policy tool for poverty reduction and social justice. It does not require significant direct government expenditures, is a simple and visible way for the government to show its commitment to social justice and support those at the bottom of the income distribution, is easily targeted to the poorest workers, and affects a market—the labor market—in which Latin American governments are comfortable intervening. Other social programs with poverty reduction objectives have been tried, such as cash transfers or public works, but they tend to be difficult to target and monitor, impose high nonlabor costs, and create political economy disputes. Thus, the selftargeting, lower monitoring, low leakage, “right” worker incentive and labor market-focused characteristics of the minimum wage may make it an attractive social protection tool.

The minimum wage was created in the late 19th century in New Zealand and Australia, and within 30 years it had a strong presence in Latin America and the Caribbean (LAC). The design of LAC’s minimum wage institutions was based on two principal objectives. The fair wage objective centered on the idea that each occupation has a fair wage, which may be different from the level determined by the market. Ideally, collective bargaining would correct the imbalance, but if that was not possible, it was . . .

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