Is A Guaranteed Living Wage A Good Anti-Poverty Policy?
Year: 2005
Type: report
Abstract: Minimum wages are generally thought to be unenforceable in developing rural economies. But there is one solution - a workfare scheme in which the government acts as the employer of last resort. Is this a cost-effective policy against poverty? Using a microeconometric model of the casual labor market in rural India, the authors find that a guaranteed wage rate sufficient for a typical poor family to reach the poverty line would bring the annual poverty rate down from 34 percent to 25 percent at a fiscal cost representing 3-4 percent of GDP when run for the whole year. Confining the scheme to the lean season (three months) would bring the annual poverty rate down to 31 percent at a cost of 1.3 percent of GDP. While the gains from a guaranteed wage rate would be better targeted than a uniform (untargeted) cash transfer, the extra costs of the wage policy imply that it would have less impact on poverty.
Authors: Rinku Murgai, Martin Ravallion
Institutions: World Bank, World Bank Group, Georgetown University
Language: English
Subfield: Safety Research
Field: Social Sciences
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2103097277