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Demystifying the Impact of Minimum Wages

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David Neumark is Professor of Economics at University of California, Irvine.
John T. Addison is Professor of Economic Theory at University of South Carolina.

In recent years, the minimum wage has become an increasingly popular policy instrument to reduce inequality in many emerging markets (like China, Hong Kong, and Cambodia), with others (like Singapore) weighing whether to adopt one. But a lot of confusion still surrounds the impact of minimum wages in advanced economies, let alone what might occur in the emerging markets.

In this blog, we speak with two experts on the topic: David Neumark (Professor of Economics, University of California, Irvine) and John T. Addison (Professor of Economic Theory, University of South Carolina). They both point to some job loss, especially for skilled workers, in advanced economies.

Singapore Clarke Quay Elgin Bridge underpass 2013 (by RSCLS street art collective). Photo: Flickr/66944824@N05 (Denis Bocquet)

But they also stress that the outcomes elsewhere are complicated by the existence of large informal sectors, more low-wage workers, inconsistent enforcement, and the possible lack of a social safety net. Moreover, the impact on inequality also has to be taken into account.

In our next blog, Neumark and Addison focus on the trade-offs for policy makers. (See the Jobs Group’s Google Hangout on the topic organized by the Hong Kong University of Science and Technology Institute for Emerging Market Studies, and Neumark’s survey of the literature).

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