Did the Minimum Wage Alleviate Poverty? New Evidence from a Residual Welfare State

Mengyu Liu , The Hong Kong Polytechnic University
Zhuoni Zhang, The Hong Kong University of Science and Technology (Guangzhou)
Xiaogang Wu, New York University

Hong Kong first implemented a statutory minimum wage (HK$28 per hour) in 2011. While official and academic researchers have found that this policy has improved the earnings of the targeted population, the extent to which the minimum wage has alleviated poverty has not been fully examined. Using data from the Hong Kong Panel Study of Social Dynamics from 2011 and 2013, we employed difference-in-differences fixed effects models to evaluate the anti-poverty effect of the minimum wage in Hong Kong. We found that its introduction effectively increased earnings and reduced the risk of poverty. However, the anti-poverty effects were mainly observed in a subgroup with a moderate level of working poverty (receiving an hourly wage of between HK $25 and HK $28). The minimum wage increased the individual earnings of those who were extremely low paid (with an hourly wage below HK$25) but had no significant effects on their household income or risk of poverty. Our findings support the literature on the anti-poverty effects of the minimum wage but demonstrate the importance of target efficiency. Poverty alleviation for the extremely low-paid workers requires alternative policy interventions.

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 Presented in Session P7. Education, Labor Market, and Economic Issues