The Minimum Wage and Income Poverty

Indeed, in most European countries the national threshold is actually exceeded. This makes raising the minimum wage seem a relatively blunt instrument for reducing the risk of poverty. In 2018, for example, of the full-time employees who were receiving an hourly wage between the then minimum and 10 euros, only 13 per cent were technically income poor. This was 4 percentage points below the population average. Working hours have an important influence on the risk of poverty. At 26 per cent, the proportion of income poverty among part-time employees with an hourly wage of between 8.84 euros and 10 euros was almost twice as high as among full-time employees. A simulation calculation shows that, even if it was universally observed, an increase in the minimum wage to 12 euros would reduce the income poverty rate by little more than a single percentage point. On the other hand, a sharp increase in the minimum wage is likely to impact negatively on working hours and employment – especially in view of the imminent threat of severe recession. Further compression of the wage structure would also reduce the incentives for low-skilled workers to undergo vocational training.