Not So Fair Pay_Economist_6-25-1998

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Not so fair pay Jun 25th 1998 From The Economist print edition Politicians in Britain, Ireland, France and America want to establish or increase minimum wages. This may not help the working poor MINIMUM wages do create some jobs—for economists. In America economists have had a field day studying whether setting a floor under pay destroys jobs or reduces poverty. Their British counterparts will soon benefit too, when Britain introduces a minimum wage next April. But will the working poor—whom minimum wages are meant to help—be cheering too? The first comprehensive international study of the impact of minimum wages*, published this week by the OECD, suggests not. The reason is that the policy of wage regulation is ill-suited to dealing with the problem of poverty. In most countries, the OECD reports, relatively few low-paid workers live in low-income households, and relatively few low-income households have low-paid workers. The benefits of minimum wages, such as they are, largely by-pass the poor. This is not, in general, because they lose their jobs. Critics of minimum wages frequently argue that a government-mandated pay level reduces total employment, because firms will scale back hiring rather than adding employees who must be paid more than they are worth. The study finds little evidence of this as far as adults are concerned: so many factors affect firms’ employment decisions that the OECD’s economists cannot separate the impact, if any, of a minimum wage. There are great differences in minimum wages from country to country (see chart
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This note was uploaded on 03/02/2010 for the course BUAD 350 taught by Professor Safarzadeh during the Spring '07 term at USC.

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Not So Fair Pay_Economist_6-25-1998 - Page 1...

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