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April 2012

The Unintended Consequences of Increases in the Minimum Wage

Ximena Del Carpio's picture

Most countries around the world have some form of minimum wages. Policymakers have often argued that raising the minimum wage increases the income of low-income workers, and therefore can be used as a tool to reduce poverty and inequality. Some policymakers also argue that wage increases can improve workers’ productivity (Levine, 1992; Raff and Summers, 1987) because they lead to increases in work effort, reductions in job turnover and more on-the-job training (Katz, 1987). However, several studies find that increases in minimum wages without commensurate increases in labor productivity could lead to job losses in the formal sector. The main reason provided for this argument is that poor workers—the people expected to benefit from the policy—are more likely to be pushed out of formal employment because they often have limited skills and low productivity, and thus tend to be among the first to be laid off when minimum wages increase.

The Global Findex: The first database tracking how adults use financial services around the world

Asli Demirgüç-Kunt's picture

The facts are in. 50 percent of adults worldwide have an account at a formal financial institution. 21 percent of women save using a formal account. 16 percent of adults in Sub-Saharan Africa use mobile money. These are just a few of the thousands of data points now available in the Global Financial Inclusion (Global Findex) database, the first of its kind to measure people’s use of financial products across economies and over time.

Thankfully, researchers and policymakers no longer have to rely on a patchwork of incompatible household surveys and aggregated central bank data for a comprehensive view of the financial inclusion landscape. The publically  accessible Global Findex provides comparable individual-level data that facilitate detailed analyses of how adults save, borrow, make payments, and manage risk in 148 economies. The data are based on more than 150,000 interviews with adults representing over 97 percent of the world’s population and was carried by Gallup Inc. as a component of its 2011 World Poll.

Is Bank Competition a Threat to Financial Stability?

Asli Demirgüç-Kunt's picture

The global financial crisis reignited the interest of policymakers and academics in assessing the impact of bank competition on stability and rethinking the role of the state in shaping competition policies. Competition in the financial sector has a long list of obvious benefits: greater efficiency in the production of financial services, higher quality financial products and more innovation. When financial systems become more open and contestable, generally this results in greater product differentiation, a lowering of the cost of financial intermediation and more access to financial services. But when we turn to the issue of financial stability, it is no longer so obvious whether competition is beneficial or not, with a continuing debate among academics and policymakers alike. Some believe that increasing financial innovation and competition in certain markets like sub-prime lending contributed to the recent financial turmoil. Others worry that as a result of the crisis and the actions of governments in support of the largest banks, concentration in banking increased, reducing the competitiveness of the sector and potentially contributing to future instability as a result of moral hazard problems associated with “too big to fail” institutions.