{
  "title": "A European Minimum Wage: Implications for Poverty and Macroeconomic Imbalances",
  "publication": "IMF Working Papers, May 22, 2020",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2020/05/22/a-european-minimum-wage-implications-for-poverty-and-macroeconomic-imbalances-49453",
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  "summary": "A hypothetical European Minimum Wage (MW) set at 60 percent of each country’s median wage would reduce in-work poverty but have limited effects on overall poverty, as many poor households do not earn a wage near MW and higher unemployment, higher prices, and a loss of social insurance benefits may e",
  "sections": [
    {
      "heading": "Findings on poverty",
      "content": "- A hypothetical European Minimum Wage (MW) set at 60 percent of each country’s median wage would reduce in-work poverty.\n- The MW would have limited effects on overall poverty because many poor households do not earn a wage near MW.\n- Higher unemployment, higher prices, and a loss of social insurance benefits may erode the direct poverty-reducing benefits of MW."
    },
    {
      "heading": "Findings on competitiveness and macroeconomic imbalances",
      "content": "- The MW increase needed to reach the European standard would be larger in euro area countries with excessive external surpluses.\n- The associated real appreciation in those surplus countries should help curb existing imbalances.\n- A few countries with already weak external positions would experience an undesirable real appreciation."
    },
    {
      "heading": "Mechanisms and risks",
      "content": "- Direct benefits to in-work poor rely on workers earning wages near the MW level; households without such wages receive limited direct gains.\n- Offsetting forces include:\n  - higher unemployment,\n  - price increases,\n  - loss of social insurance benefits.\n- Distributional and competitiveness effects vary across countries depending on existing wage levels and external positions."
    },
    {
      "heading": "Policy implications and considerations",
      "content": "- A uniform MW set at 60 percent of median wages could be a tool to reduce in-work poverty but is not a comprehensive solution to overall poverty.\n- Policymakers should weigh:\n  - labor market responses (including potential unemployment),\n  - inflationary pass-through to prices,\n  - interactions with social insurance systems that may reduce net gains for households.\n- In the euro area, MW harmonization could help rebalance external surpluses through real appreciation in surplus countries, but it risks worsening external competitiveness in some deficit countries.\n\nIMF Working Paper — \"A European Minimum Wage: Implications for Poverty and Macroeconomic Imbalances\" (May 22, 2020).\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2020/05/22/a-european-minimum-wage-implications-for-poverty-and-macroeconomic-imbalances-49453"
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    "Authors: Enrica Detragiache, Christian H Ebeke, La-Bhus Fah Jirasavetakul, Koralai Kirabaeva, Davide Malacrino, Florian Misch, Hyun Park, Yu Shi",
    "Published: May 22, 2020",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781513545073.001",
    "A hypothetical European Minimum Wage (MW) set at 60 percent of each country’s median wage would reduce in-work poverty.",
    "The MW would have limited effects on overall poverty because many poor households do not earn a wage near MW.",
    "Higher unemployment, higher prices, and a loss of social insurance benefits may erode the direct poverty-reducing benefits of MW.",
    "The MW increase needed to reach the European standard would be larger in euro area countries with excessive external surpluses.",
    "The associated real appreciation in those surplus countries should help curb existing imbalances.",
    "A few countries with already weak external positions would experience an undesirable real appreciation.",
    "Direct benefits to in-work poor rely on workers earning wages near the MW level; households without such wages receive limited direct gains.",
    "Offsetting forces include:",
    "Distributional and competitiveness effects vary across countries depending on existing wage levels and external positions.",
    "A uniform MW set at 60 percent of median wages could be a tool to reduce in-work poverty but is not a comprehensive solution to overall poverty.",
    "Policymakers should weigh:",
    "In the euro area, MW harmonization could help rebalance external surpluses through real appreciation in surplus countries, but it risks worsening external competitiveness in some deficit countries.",
    "**Working Paper**"
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