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The Minimum Wage Conundrum: Easing Poverty, Causing Pains?
20 Nov
Summary
- Minimum wages have doubled relative to median pay in Mexico over ten years.
- New research suggests minimum wages can harm low-income workers.
- High minimum wages may lead to less predictable work and more injuries.
Recent years have seen a global trend of rising minimum wages, with countries like Mexico doubling their minimum wage relative to median pay over the past decade. This policy has been credited with significant poverty reduction, as seen in Mexico where millions have climbed above the poverty line.
However, a growing body of economic research is questioning the unalloyed benefits of high minimum wages. Emerging studies indicate potential negative side-effects, including a modest reduction in hours worked for low-wage employees and a slowdown in hiring. Some findings suggest that excessively high minimum wages can distort the economy and ultimately harm the very workers they aim to help.
Beyond direct employment impacts, concerns are surfacing about other distortions. These include less predictable work schedules, an increase in workplace injuries, and a potential decrease in business investment. While minimum wages can be a powerful tool for redistribution, economists caution that they may be a less efficient method compared to other policies, and their progressive impact on prices can disproportionately affect low-income households.
