Reducing Poverty through the Implementation of Minimum Wage

Abstract

In this study, the effects of minimum wage and minimum wage laws on poverty are examined by looking at cross-country evidence. This study performs a Pooled Ordinary Least Square (POLS) regression analysis of the data for the 2001 – 2007 period. The estimation results show that there is insufficient evidence to support the hypothesis that a country with minimum wage rate policy enjoys a significant reduction in poverty rates. However, the results suggest that a higher minimum wage rate reduces the poverty rate of involved countries. The policy implication arises from the results is that the mere presence of minimum wage policy does not have any bearing on poverty. Necessarily, the level of minimum wage rate must be high enough to affect reducing poverty.