Description
This paper investigates the impacts of minimum wages on employment, wage earnings and poverty at the household level both in a theoretical framework and in an applied modelling framework based on South African data. Section 2 reviews the theory and literature, while section 3 provides a detailed analysis of the possible linkages between minimum wages, employment, household incomes and poverty. Section 4 present results from two types of models used to evaluate the possible impacts of minimum wages. The first is a so-called partial equilibrium model that considers the labour market in isolation from the rest of the economy, although some links are drawn between the labour market and households. This simple model allows us to evaluate how labour market changes affect household incomes and hence poverty at the household level. The second is a general equilibrium model that, in addition to the factor market-household linkages, considers all the other linkages and feedback effects in the economy. Section 5 draws general conclusions.
