MINIMUM WAGES AND THE ‘WORKING POOR’

Abstract

This paper uses data from the HILDA Survey to examine whether or not a minimum wage increase can do much to alleviate poverty or reduce earnings inequality. It is concluded that any poverty reducing effects will be modest. Most low-wage employees are not found living in the poorest households, and among those that are, many combine part-time work with receipt of a government benefit. It is also concluded that minimum wage increases are likely to be of limited effectiveness in protecting the living standards of the ‘working poor’. This is because the large increases in hourly wages experienced by most low-wage workers do not always translate into similarly large increases in annual earnings.