The Effect of the Minimum wage on the Income Distribution of Developingband Developed Countries

Abstract

Appropriate distribution of income and reduction of inequality are one of the government’s goals. Different policies and tools are used to achieve this and the minimum wage is one of them. In this study, the effects of minimum wages on income distribution, due to the most similarities in development and per capita income were studied in 7 selected developing countries including (Pakistan, Armenia, Iran, Belarus, Chile, Egypt, Georgia) and 7 selected developed/development countries including (USA, France, Japan, Sweden, Netherlands, Belgium, and Canada) with generalized minimum squares from the years 2000 to 2020. The results show that, in developing and developed countries, an increase in the minimum wage, improves income distribution and the effects of this policy in developed countries are much greater than in developing countries. Therefore, developing and developed countries should increase the minimum wage in proportion to the rate of inflation to progress and improve income distribution.Appropriate distribution of income and reduction of inequality are one of the government’s goals. Different policies and tools are used to achieve this and the minimum wage is one of them. In this study, the effects of minimum wages on income distribution, due to the most similarities in development and per capita income were studied in 7 selected developing countries including (Pakistan, Armenia, Iran, Belarus, Chile, Egypt, Georgia) and 7 selected developed/development countries including (USA, France, Japan, Sweden, Netherlands, Belgium, and Canada) with generalized minimum squares from the years 2000 to 2020. The results show that, in developing and developed countries, an increase in the minimum wage, improves income distribution and the effects of this policy in developed countries are much greater than in developing countries. Therefore, developing and developed countries should increase the minimum wage in proportion to the rate of inflation to progress and improve income distribution.

Keywords

• minimum wage
• income distribution
• gini coefficient
• developing countries
• developed countries