Effects of Minimum Wage Policy on Poverty in Argentina

Inhaltsangabe:Introduction: In 1886, when New Zealand passed the ‘New Zealand Industrial Conciliation and Arbitration Act’ it was the first modern country to enact a minimum wage. Half a century later on June 25, 1938, US-President Franklin D. Roosevelt signed into law America's first minimum wage: 25 cents an hour. Since that time minimum wages are a frequent topic of international economic science. Many economists have discussed the question whether or not a statutory wage floor is a useful tool for achieving social goals. Especially the Chicago School of Economics and its representatives like Milton Friedman or George Stigler rejected minimum wage policies. They were supported by ordoliberal economists like Walter Eucken or Friedrich Hayek. On the other side, supporters of Keynesian theories have often been in favor of statutory wage floors. For a long time most economists restricted research about the impact of minimum wages to its employment effects in industrial countries. By doing that, there was an astonishing accordance that the effects are insignificant if the minimum wage is low and employment-reducing if it is above a certain threshold. But in the last twenty years, there has been a new discussion about whether or not this result can be proved with recent data and new econometric methods. Especially the study by Card and Krueger in 1994 called the negative employment effects into question. However, minimum wages are not intended to stimulate employment but to increase the welfare of poor workers. Therefore, economic research should focus on the welfare effects of institutional wage floors. This includes employment and price effects as well as the impact on human capital accumulation. In other words, analyses about minimum wages must comprise a couple of indicators for welfare. Another weak point of minimum wage research is its focus on industrial countries. There is little evidence about minimum wages' impact on poverty in developing or emerging economies. Since a large share of the population in poor countries still suffers from enormous destitution and minimum wages are intended to alleviate poverty, it is of great interest whether or not this goal has be achieved. Argentina is an upper-middle income country and experienced a severe economic crisis in 2001/2002 with a dramatic downfall of the GDP. Since then the country has rebounded and poverty rates have decreased substantially. At the same time, the Argentine government raised [...]