NCPA - National Center for Policy Analysis

OECD Says Minimum Wage Benefits Bypass Poor

June 27, 1998

Minimum-wage regulations are ill-suited to dealing with the problem of poverty, according to a new study from the Organization for Economic Cooperation and Development.

  • In most countries, few low-paid workers live in low-income households and few low-income households have low-paid workers.
  • According to the OECD, the problem is not that minimum wages destroy adult jobs -- but that younger, inexperienced workers are cut out of the work force by minimum wage increases, a phenomenon which differs in impact from country to country.
  • The study found that a 10 percent rise in the minimum wage reduced teenage employment by between 2 and 4 percent in nine countries from 1975 to 1996.
  • A policy attempting to mitigate the impact of an increase in minimum wages on youth -- such as by employing exemptions or reduced rates for them -- is not particularly effective.

The study found that the disparities created make it less attractive to hire the young.

Many studies have found that minimum wages have no effect in reducing inequality and poverty among households.

Source: "Not So Fair Pay," Economist, June 27, 1998.


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