Minimum Wages and Poverty in India

University essay from Lunds universitet/Ekonomisk-historiska institutionen

Abstract: A minimum wage policy has often been implemented to get workers out of poverty. However, the policy’s impact has been questioned, both theoretically and empirically, whether it fulfils its purpose. The aim of this study is to investigate the effects of minimum wage on poverty in India. After the liberal reforms in 1991 has India been growing steadily, which has been followed by decreasing poverty rates. How minimum wages, stated as the most important labour regulation within the country, has contributed to this development has not yet been examined. By analysing Indian household and individual data, this study estimates the impact of minimum wages on poverty by utilizing a probit method. Particularly, the study distinguishes between sectors, industries and employment differences. Additionally, it uses several poverty lines for capturing how minimum wages are different along the income distribution. The study suggest that minimum wages have had an overall positive impact on poverty in India. A result that is primarily driven by the rural sector.

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