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What can minimum wage legislation tell us about equitable growth?

A comprehensive study at 911 is transforming our understanding of how minimum wage legislation affects employment trends, helping identify the causes of income inequalities and ways to tackle them.

SDG Case study G8.5-lindner

7 October 2020

The disparityinwagesbetween thehighest-and lowest-paidworkershas increaseddramaticallyin the last 20 yearsin most developed countries.

Economistsare striving tounderstand what drives suchinequalities and what mechanisms and policies can beimplementedto ensureparticularsectionsof the workforce are not unfairly disadvantaged,whileat the same time encouragingeconomic growth.

While many have welcomed minimum-wage policies,economists continue todebatewhetherthe neteffects onemployment trends andlabour marketsare positiveor negative.

“Some are convinced that the minimum wage will raise living standards for many, while others believe it could lead to increased unemployment.”

“Some are convinced that the minimum wage will raise living standardsfor many andclose the wage gap, while others believe it will limit the competitiveness of firms in the long run and could leadto increasedunemployment,”explains Attila Lindner(UCLEconomics).

Attilaisinformingthis debate by providing a comprehensive assessment of the economic consequences of minimum wage policies.Hisstudywill providenew insights toinform existing economic modelsand develop newmodels,whichbetter represent low-wage labour markets.

He isworkingwith large-scale administrative data sets from three countries–theUSA, Germany, and Hungary–toidentifyhow minimum wages affect the allocation of resources;for example,how workers move between firms andhowfixing a minimum wage affects wage distribution andthe flow ofjobs between firms.

“We will alsolook at the impact of the minimum wage on different groups in the populationsuch asimmigrant and native workers,”he explains,“andassess the effect of minimum wages on maternal labour supply, on child development and eventually on intergenerational mobility.

“By unbundling the structure of the low-wage labour marketsin this way,we can better understand the causes of inequality,”he asserts.

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