THE MINIMUM WAGE, WAGE SUBSIDIES, AND POVERTY

In an attempt to augment the lowest wages, the United States and several other countries utilize legal minimum wages. However, the minimum wage has potentially adverse employment effects. The analysis here suggests that an alternative policy that combines a minimum wage and a wage subsidy is superior to either by itself. Such a combination can assist the low wage worker, avoid disemployment effects, and maximize market efficiency. Copyright 1993 Western Economic Association International.