Wednesday, July 3, 2013

The role of minimum wages in providing a safety net in Australia

When I first called this blog 'The Wooden Finger Depot' I conceived of it mainly as a depository for various pieces that I had written. Since then of course most of the pieces I have written for this blog have been conceived with a 'blog readership' in mind. However this piece fits firmly in the 'Depot' category. It is an essay I wrote for my Masters a couple of years ago. I'm quite proud of this essay in particular because at the time it was a topic I knew something about (and I got a really good mark for it), although I might change my thoughts on some areas if I was to rewrite it today. Perhaps somebody who types 'safety net', and 'minimum wages' and 'Australia' into Google will get something from it one day.  

P.S. I probably got marks taken off for my referencing.


The aim of this essay will be to examine and assess the role of minimum wages in providing a safety net in Australia. Minimum wage laws are in effect in a number of jurisdictions around the world, and prescribe the lowest amount that can be legally paid to workers who fall within their coverage. Such laws are often seen as socially desirable because they guarantee workers – in particular, those workers who have the least amount of power in the labour market – a minimum amount of income from employment, therefore reducing poverty and lowering the amount of income inequality. However, many commentators have disputed how effective minimum wages actually are in achieving these goals; the most well-known argument being that minimum wages cause employers to reduce their employment of low-skilled workers. These disputes have raised doubts about what role minimum wages should have, if any, in protecting the incomes of the least advantaged members of society. Social policy is defined by Bessant et al. (2006) as what “governments do when they attempt to improve the quality of people’s lives by providing a range of income support, community services and support programs” (p. 5). Through examining in detail the role minimum wages have had, or been intended to have, in providing a safety net to Australian workers, it is hoped that some tentative conclusions can be drawn about what role they play in social policy both now and into the future.        

The essay will be structured as follows. First, it will consider what is meant by the term “safety net” and what the function of a safety net is. Second, it will consider views about the purpose of minimum wage regulation, and how it might be said to act as a safety net for workers. Third, it will outline the development of minimum wages in Australia over the past century to add some further context about the role of minimum wages, and how this role has evolved over time. Fourth, it will briefly show how the role of minimum wages in Australia differs from that of other developed countries. Finally, it will assess the evidence for and against the effectiveness of minimum wages as a safety net, and draw some implications for the potential role of minimum wages going forward.

Defining the safety net

Grosh et al. (2008: 5) outline several definitions of “safety nets” and “social assistance” that have been used by major international organisations. Based on this set of definitions, they use the term “safety net” to refer to “non-contributory transfer programs targeted in some manner to the poor or vulnerable” (p. 4). Such programs could include cash transfers such as family allowances, subsidies (often for essential commodities such as food or energy), and fee waivers for health and education. However, their definition is narrow in that it excludes programs such as unemployment benefits[1] and the regulatory aspects of labour that might be considered part of the safety net in developed countries (and will be for the purposes of this essay). Of the definitions they cite, the one that is possibly most appropriate to the Australian context comes from a report by the Organisation of Economic Co-operation and Development (Adema 2006). This report defines social assistance as support that:

... is targeted on households that are clustered within the lower segment of the income distribution, and is provided with multiple goals in mind: preventing extreme hardship among those with no other resources; reduce social exclusion; minimise disincentives to paid employment; and, promoting self-sufficiency (Adema 2006: 6).

This definition makes clear that a safety net or social assistance is focused upon those households with the lowest incomes, and is broad enough to capture many of the policies and programs that developed countries use to support these households.[2]

Grosh et al. (2008: 25) claim that safety nets have both a protection function and a promotion function. In terms of protection, safety nets “protect the poor from the worst of destitution and from falling deeper into poverty when faced with an economic shock” (p. 25), by redistributing income to the poorest households. Similarly, Adema (2006) states that in “most OECD countries the objectives of social assistance systems include providing sufficient means for those dependent on it” (p. 14), while noting that what is considered sufficient will vary across jurisdictions. In terms of promotion, Grosh et al. (2008) claim that safety nets “promote independence, allowing households to invest and thereby improve their livelihoods” (p. 25). What is meant here is that safety nets allow people to invest in productive assets and improve human capital. Adema (2006) takes a slightly different tact in relation to promoting independence, emphasising that a safety net helps people to re-integrate into the labour market, thereby retaining their autonomy. This difference in approach arises from a concern about people becoming dependent on income support for long periods of time (Adema 2006: 13). It could be argued that moving people off income support is a more relevant objective in developed countries, where levels of absolute poverty are considerably lower. Grosh et al. (2008) also view the safety net as having a promotional function in terms of reducing inequality, helping to create a “virtuous circle” in which reduced inequality leads to the development of institutions and policy choices that favour a broader base of growth rather than the generation of profits for particular groups.  

Minimum wages as a safety net

Assuming that the aim of a safety net is to protect the income and promote the independence of the poorest households, how do minimum wages fit into this purpose? Healy (2010) considered the question of why are minimum wages set by reviewing the empirical literature around the reasons used to justify minimum wage regulation. The first major reason he identified was to protect groups of workers that would be vulnerable to exploitation in an unregulated labour market. In the absence of minimum wages some workers may be paid at a rate that would be considered as being below a “decent” level of income from employment. The second major reason identified was to narrow the dispersion of earnings, by raising wages at the bottom of the distribution. Possible reasons for doing this include: increasing the fairness of the financial rewards for working; improving the chances of upward mobility for those in low-paid jobs; the potential for relationships between earnings inequality and other forms of inequality and; evidence that inequality can exacerbate other social ills (e.g. crime). The third major reason identified was to reduce or eliminate the incidence of poverty at the household (or family) level. The first and third of these reasons could be seen as closely related to the protection function of the safety net, while the second reason could be seen as closely related to the promotion function (although it could be argued that all of these reasons actually relate to both functions – for example, protecting a person’s income in turn promotes that person’s independence). For each of these reasons, Healy considered the evidence on the extent to which minimum wages actually fulfil these functions – these findings will be addressed in further detail below.


Current legislation relating to minimum wages in Australia is not prescriptive about how minimum wages act as a safety net for workers. The Fair Work Act 2009 states (at s.284) that Fair Work Australia – or more specifically, the Minimum Wage Panel – must establish and maintain a safety net of fair minimum wages, taking into account a list of factors, which include (among other things) the performance and competitiveness of the national economy, promoting social inclusion through increased workforce participation, and the relative living standards and the needs of the low paid. Again, promoting social inclusion could be seen as closely related to the promotion function of the safety net, while accounting for living standards and the needs of the low paid could be seen as closely related to the protection function. However, the term “safety net” itself is not defined in the Act, and the Panel has reached no explicit conclusion of its own about what it means or what its purpose is. It did state in its 2009–10 Annual Wage Review Decision that both “minimum wages and the tax/transfer system are both relevant to the maintenance of an effective safety net ... [w]ages play a particularly important role in the maintenance of disposable incomes for households not receiving income support payments” (Fair Work Australia (2010): para. 242). A possible interpretation of this statement is that minimum wages are to be considered as particularly important for maintaining the incomes of single adults who are not in receipt of family allowances.

The Panel’s predecessor, the Australian Fair Pay Commission, also agreed that both minimum wages and the tax/transfer system are relevant to the safety net (Australian Fair Pay Commission 2006: 12), although it could be argued that it placed greater emphasis on the total increases in household income for low-paid employees resulting from the combined effects of wages, tax cuts and income transfers. The Commission also noted – along the lines of Adema’s definition of a safety net – that there was general agreement amongst stakeholders “that minimum wages should provide sufficient financial incentives for unemployed people to take up paid work” (p. 12). However, like the Panel, the Commission did not explicitly define what the safety net is, what its purpose is, and how minimum wages fit into that purpose.    

Taking all of the above in account then, one approach is to say that minimum wages function as a safety net by – possibly in combination with the tax/transfer system – ensuring the income from employment of low-paid workers does not fall below a certain level, thereby protecting them from poverty. Further, minimum wages should promote or strengthen the degree of inclusion in society of its most vulnerable members through promoting participation in work (which increases people’s skills and resources) and reducing the level of inequality.  The next section will add some further points around this function by looking at how minimum wages have developed in Australia over time.

Historical development of minimum wages as a safety net in Australia

While wage boards in Australia had been established prior to federation, a major landmark for wage-setting in Australia was the “Harvester Judgement”, which was delivered by Higgins J in 1907. In that decision, the primary test which Higgins J applied to ascertaining the minimum wage that could be treated as “fair and reasonable” in the case of unskilled labourers was that it was sufficient to obtain proper food and water, shelter, clothing, and “a condition of frugal comfort estimated by current human standards” (Ex Parte HV McKay (1907), p. 4).  It also stated that those “who have acquired a skilled handicraft have to be paid more than the unskilled labourer’s minimum” (p. 4). The decision therefore encompassed the notion that all (male) workers should, at a minimum, receive a basic wage that was enough to meet the normal needs of an average employee and his family, and that the minimum wage received should be higher for skilled workers. The Australian Treasury (2008) also claims that it “effectively introduced a model where welfare outcomes were pursued via wage-related benefits rather than tax assistance or transfers” (p. 195).   

From 1914 onwards (after a national price index had been introduced), there were attempts to adjust the value of this basic wage for inflation or changes to the cost of living; although in practice, until the early 1920s, lags in adjusting wages meant there were often declines in their “real” values (Forster (1985): 384). This decline was highlighted by the Piddington Royal Commission in 1920, which also proposed that, given the basic wage was not enough to support a whole family, that it “be calculated on the basis of a couple without children and the government provide an endowment for each child – an idea that came to fruition at the federal level in 1940” (Smyth (2008): 652). Not long after, the Commonwealth Court of Conciliation and Arbitration institutionalised automatic, quarterly cost-of-living adjustments to wages (Forster (1985): 384). However, in the 1920s and particularly around the time of the Great Depression, there was an increased emphasis by the Court upon the capacity of employers to pay higher wages, which was reflected in the instances of wage restraint and wage reductions during that period (Hancock (1979)). Smyth (2008) argues that, up to the Second World War, the “family wage concept appears to have had only a marginal influence on wage setting practice and was largely set aside when it conflicted with the principle of the capacity of industry to pay” (p. 653). Importantly though, he maintains that wages policy during this period was less about protecting people from market forces than commonly thought, and more about investing in people through equipping them with the means to manage their own risks; i.e. promoting their independence. 

After the war, there was a significantly higher entry of women into the paid workforce. In the 1967 National Wage Case, it was decided that minimum wages for men and women would be increased by the same amount (prior to this, minimum wages for women were adjusted by some proportion of minimum wages for men). Following this, in 1972–73, award rates were set without regard to the sex of the employee. As an extension of this increase in pay for women, in 1974 the Commonwealth Conciliation and Arbitration Commission decided to discard the “family component” of the minimum wage. The Commission remarked that while it was “conscious of the difficulty of doing adequate justice to the widely varying family obligations of workers on the minimum wage” it would not vary the wage in relation to the number of people dependent on the worker, and that “the care of family needs is principally a task for governments” (Nieuwenhuysen (1974): 285).

From 1975 to 1981, when inflation was rising rapidly, minimum wages were indexed to prices. Kates (2003: 23), taking an employer’s perspective, suggests this meant that the Commission was concerned about protecting the real incomes of wage earners, and were therefore leaning back to the “needs” concept of wage fixation as against the “capacity of industry to pay”. However, indexation also addressed the economic need to control inflation by limiting growth in real wages. In 1983, the Prices and Income Accord between the government and unions was signed – a highly centralised arrangement where the union committed to no wage increases outside half-yearly adjustments based on price increases in exchange for improvements in the “social wage” relating to taxation, superannuation and education. Pure indexation of wages was abandoned in 1986 for a two-tier structure where wages were linked to both prices and productivity improvements as negotiated between employers and workers. This reflected a growing push for “enterprise bargaining”, where wages would primarily be set at the enterprise level rather than through the arbitration system, and which would largely determine the modern concept of a wages safety net in Australia.

According to Healy (2010), the reconfiguring of awards in terms of a “safety net” occurred in the late 1980s and the early 1990s through the government and unions. Legislation had weakened the ability of the Australian Industrial Relations Commission not to certify single-enterprise agreements. The Australian Council of Trade Unions envisioned the awards safety net as a base for enterprise-level negotiations, and upon re-election in 1993, Prime Minister Keating declared that the award system “would not be intended to prescribe the actual conditions of work for most employers, only to catch those unable to make workplace agreements with employers” (quoted in Healy (2010), p. 27). From this account of events, Healy argues that the main purpose of the wages safety net is the protection of employees who lack the effective capacity to bargain their pay directly with employers.

This concept of the safety net could be argued to also apply to the Workplace Relations Act 1996 and even the Workplace Relations Amendment (Work Choices) Bill 2005, albeit in a reduced form. The WR Act brought in a list of “allowable matters”, which meant that some conditions were deleted from awards (Healy (2010): 29). However, the Australian Industrial Relations Commission was still directed by the Act to ensure that a safety net of fair minimum wages and conditions was established and maintained, having regard to general living standards, economic factors, and the needs of the low paid. Healy (2010) notes that the Work Choices legislation removed the references to living standards and the needs of the low paid, which was widely seen as abandoning the “social” functions of the wages safety net. Whether this happened in practice was beyond the scope of Healy’s paper, although as shown above the Australian Fair Pay Commission did make references to living standards and needs in the course of outlining the reasons for their decisions (Australian Fair Pay Commission (2006)). Critics of the Commission’s decisions have pointed out that award rates of pay fell substantially relative to measures of average and median earnings during the period in which it was responsible for setting minimum wages (Australian Council of Trade Unions (2011)). As mentioned above, Fair Work Australia is currently obliged to take into account “relative living standards and the needs of the low paid” in adjusting minimum wages. The current system also has a substantially reduced number of awards, with previous pay structures having been consolidated, and it provides for ten National Employment Standards which cover non-wage components of the safety net, such as leave, termination and redundancy payments.     

Drawing on the above discussion then, the following observations can be made about the role of minimum wages as a safety net in Australia. Minimum wages have generally been set so as to provide a sufficient level of income for a worker to meet their costs of living, and have been increased over time as those costs of living have increased. Initially, there was an emphasis on minimum wages meeting the needs of the families of the workers, but this has diminished over time as governments have introduced payments for families with children, and a higher percentage of women have entered the workforce. On occasions, wage increases have been “traded off” or “discounted” for improvements in other areas of the safety net. Some references throughout time have also been made to general standards of living within the community, and ensuring that those workers earning minimum wages do not fall too far behind those standards. These “social” considerations though have usually been balanced against “economic” factors such as the capacity of employers to pay higher wages and the need to control inflation. The relative importance of “social” and “economic” factors has varied over time according to the economic circumstances and the wage-setting regime in place. A distinguishing feature of the Australian system of minimum wages has been preserving a set of minimum wages for relatively higher-skilled workers that are set at some margin above the wages for low-skilled workers. In recent years, this has caused some tension with the view that minimum wages should act primarily as a safety net for those who lack the capacity (or “market power”) to bargain directly with employers. These issues will be revisited later in this essay when considering the potential role of minimum wages going forward.

Role of minimum wages in other developed countries

Many countries, both developed and developing, have statutory minimum wage rates, which are set by a wide variety of institutions and processes. Rather than outline these systems in detail, this section will focus on the main differences between the Australian system of minimum wages compared with minimum wage systems of other developed countries, and how these affect the role of the wages safety net in Australia.    

The main distinguishing feature of the Australian system of minimum wages is that there are multiple, skill-based wage minima, which are contained in the various awards. In Australia, the various industrial relations tribunals have historically made awards that regulate the minimum terms and conditions of employment in particular industries and occupations in order to settle industrial disputes. In comparison, most jurisdictions in developed countries have only one standard adult minimum wage in effect[3], with some jurisdictions also having minimum wages for workers in training or younger workers. What this means is that, in Australia, the safety net is not only intended to protect the incomes of the lowest-paid workers, but also to ensure that workers receive a minimum level of income that is commensurate with their skill. On the one hand, this could be seen as promoting skill development and reducing inequality by raising the incomes of not only the lowest-paid employees, but also other employees that are in the lower part of the wages distribution. On the other hand, it may be protecting the incomes of some workers that are not in hardship and do not necessarily have a great need for such protection.

The fact that Australia has a set of wage minima does not necessarily mean that it has a relatively centralised wage system. According to the most recent data from the Australian Bureau of Statistics (2010), only around 15 per cent of employees are paid exactly the award rate of pay, although other employees may be affected by minimum wage adjustments. Australia’s system could be considered more centralised than, for example, the United States, the United Kingdom, or New Zealand. However, some countries in Europe, including some without statutory minimum wages, tend to have large percentages of their workforce covered by sectoral-wide collective agreements (International Labour Organization (2008): 38). Whether this kind of wage centralisation through agreement-making constitutes a wages safety net is debatable, particularly given the recent usage of the term “wages safety net” in Australia to denote minimum wages for employees who lack the ability to bargain with employers. However, these systems could still be viewed as providing a safety net to low-paid employees in the sense that they enable them to receive a higher level of income than they would otherwise receive in a purely decentralised market.

Australia’s minimum wage is relatively high by international standards (Fair Work Australia (2011), para. 203) However, to compare how well the incomes of low-paid workers are protected in various countries, one also needs to compare their income from other sources. Another distinguishing feature of the Australian system among developed countries is that “families on low wages frequently have their income augmented through general income support and family assistance payments, as opposed to specific in-work benefits (Wilkin and Pech (2008): 542). These include payments such as the Family Tax Benefit (Parts A and B), and the Parenting Payment, which are means-tested by reference to income and taper out for higher income earners. Examples of specific in-work benefits in other developed countries include the United States’ Earned Income Tax Credit and the United Kingdom’s Working Tax Credit Scheme, which are refundable tax credits paid to low-income workers based on their level of income and family composition. Aside from these differences, Wilkin and Pech (2008: 550), using information from the OECD, found that Australia is among a small group of countries that consistently provide the highest relative incomes to minimum-wage-earning households. They compared the net incomes of full-time (adult) minimum wage workers relative to median household income across countries for a number of different household types, and found that Australia ranked near the top for each household type (although Nordic countries, which have relatively high wages but no statutory minimum wages, were not included in the comparisons). They also note that the top-ranked countries in relation to minimum wage earners also tend to offer more generous basic levels of social assistance (i.e. out-of-work income). Hence, aside from its unusual system of providing income support, Australia compares well with other developed countries in terms of the relative incomes of its low-paid workers. In addition, figures presented in Immervoll (2005) indicate that Australia also rates relatively well in terms of incentives to take up a full-time job at the minimum wage in comparison to other developed countries.   

Effectiveness of minimum wages as a safety net

In the discussion above, it was suggested that minimum wages function as a safety net by protecting the incomes of workers who may otherwise be exploited, thereby reducing the level of poverty, and by promoting participation in work and reducing the level of inequality. This section considers the evidence for and against the effectiveness of minimum wages in relation to each of these functions, and the implications for the potential role of minimum wages going forward.

There is some evidence that minimum wages protect groups of workers that would be vulnerable to exploitation in an unregulated labour market. As discussed in Neumark and Wascher (2008: 113–116), several studies show that, in developed countries at least, minimum wages have a positive effect on the wages of the lowest-paid employees; for example, the introduction of the National Minimum Wage in the United Kingdom resulted in a relatively high percentage of employees earning at or near the minimum wage. Healy’s (2010) review of the evidence around the characteristics of minimum wage employees in Australia shows that they are more likely than the rest of the workforce to be women, working part-time, and have low education, also suggesting that minimum wages are capturing the more vulnerable sectors of the labour market. However, a factor that may reduce the effectiveness of minimum wages in this area is non-compliance of employers (and employees) with minimum wage laws. Nelms, Nicholson and Wheatley (2011) found that around 7–9 per cent of adult employees with one job earned an hourly rate below the Federal Minimum Wage in 2007–08, although they were unable to conclude what proportion was due to non-compliance      

Related to this point, there is also some evidence that minimum wages reduce the level of earnings inequality. For example, Healy (2010: 48) cites evidence that there a negative correlation was found between the level of minimum wages and earnings inequality across OECD countries (not including Australia). Because of the longevity of the award system, the relationship has been harder to measure in Australia, but comparisons with the US and UK suggest that Australia’s relatively high minimum wages and award structure have narrowed earnings dispersion in Australia relative to those countries (Healy (2010): 52–54).

By far the most controversial element of minimum wages however, is whether or not they lead to a loss of employment, and therefore a loss of income from employment, for low-paid workers.  The standard economic model of the labour market shows that increasing the minimum wage lowers employment, as workers whose productive value is less than the minimum wage are unable to find work. However, an alternate view is that low-wage labour markets are characterised by monopsony, where employers have significantly more power in the labour market than employees. In this case, because the wage rate and therefore the marginal cost to the employer rises with the number of employees, less labour is hired than would be so in a competitive labour market. By ensuring that the wage rate and therefore the marginal cost are constant (up to a point), a minimum wage rate raises the level of employment (Varian (1996), 449–452). Neumark and Wascher (2006) reviewed the various empirical studies on the relationship between minimum wages and employment in various countries and showed that the overwhelming majority found evidence of a negative relationship. However, these employment effects may be relatively small if minimum wages are set at a moderate level (Rutkowski (2003): 11).

Neumark and Wascher (2008) review the evidence on whether higher minimum wages are associated with a decrease in poverty, and find that the evidence that minimum wages equalize incomes is modest at best. This may be in part because minimum wages lead to a loss of employment for some workers, and it may also be in part because minimum wage earners are not all located at the lower end of the household income distribution. Neumark and Wascher (2008) believe that the evidence is best summarised as indicating that increases in minimum wages largely result “in a redistribution of income among low-income households [i.e. from workers who lose employment to workers who receive higher wages], rather than moving low-income families up the income distribution” (p. 189). However, they point out that this evidence with regard to incomes is almost entirely confined to the United States. Healy (2010) notes that, for Australia, low-paid workers are distributed throughout the household income distribution, but are more concentrated towards the lower end.

The concerns raised above about the effectiveness of minimum wages in raising incomes and reducing poverty lend support to other policy alternatives that capture a broader base of low-paid workers, such as refundable tax credits (like the Earned Income Tax Credit), a guaranteed minimum income, or the widespread collective bargaining systems used in some European nations. In addition, the first couple of these alternatives at least would concentrate less of the costs of providing a minimum level of income on employers, and therefore they may be less likely to result in negative employment effects.

However, even if minimum wages are not the most effective means of reducing poverty and inequality, there could still be arguments for retaining them as a safety net for workers. One argument is that governments and the public may still want workers to receive a certain level of reward for their labour. This could be seen as expressing society’s values that people should work where able and receive a “fair and decent” wage from performing that work. These values could also cover the margins for skill that are present within the Australian award system, which could be seen as workers receiving a “fair” value for the level of work they have performed. Another argument is that statutory minimum wages provide a more visible “floor” to employers and employees in terms of wage bargaining than a basic level of income or a lower wage with a refundable tax credit would. While this “floor” may not make much tangible difference to the incomes of the lowest-paid employees compared with other policy alternatives, it may make some difference to the wages negotiated by low-paid employees that are slightly further up the wages distribution. In that respect then, minimum wages could again contribute to raising the rewards from work for low-paid employees.

Finally, Smyth (2008) claims that, going forward, a human capital and social inclusion model will require a social safety net that includes “not just modest income support but a clearly articulated set of entitlements that each citizen will need for full economic and social participation” (p. 660). It is possible that minimum wages could have a role within such a safety net. Minimum wages may have a role in steering the economy towards a “high-income” path, thus both demanding and providing the means for self-development. At the same time, Smyth (2008) suggests that the minimum wage “remains a key source of welfare, a role that it would be unwise and unfair to reduce without showing clearly what would take its place” (p. 660). In summary, it is the combination of the “protective” and the “promotional” aspects of minimum wages that may make them effective as a social policy tool.    


In this essay, it was argued that the primary roles of minimum wages as a safety net in Australia could be considered to be to ensure that the income from employment for low-paid employees does not fall below a certain level, therefore lowering the amount of poverty and inequality, while at the same time promoting participation in work and skill development.  The precise role has changed somewhat over time: while it has typically been considered in Australia that increases in minimum wages should be sufficient to compensate for increases in living costs and that economic factors (such as the capacity of industry to pay) should be taken into account when adjusting minimum wages, there is no longer sole pressure on minimum wages to meet all families’ needs and there is some dispute as to what extent minimum wages for higher-skilled workers should be preserved. The main differences between minimum wages in Australia and other developed countries are that Australia has a set of wage minima – though this does not necessarily mean that wage-setting in Australia is relatively centralised – and that the Australian system lacks specific in-work benefits, although evidence suggests that Australia is among a small group of countries that consistently provide the highest relative incomes to minimum-wage-earning households. Having said this, there is some evidence to suggest that minimum wages may not be the most effective tool for reducing inequality and poverty, particularly given the possibility of a negative relationship between minimum wages and employment. However, minimum wages may still have value in reflecting and determining society’s views about the value of work, both for the low-paid and for other employees, and their ability to encompass both the protective and promotional aspects of the safety net means they may continue to have an important policy role going forward.  


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[1] In some countries, unemployment benefits derive from social insurance programs that deliver benefits based on the contributions of their members.
[2] Tang and Midgley (2008) categorise “social assistance” as being part of a broader concept of “social security”, the latter of which also includes social insurance, employer mandates and social allowances. For the purposes of this discussion, all of these schemes will be considered as part of the “safety net” to the extent that they are targeted at low-income households.
[3] For some countries, such as the United States and Canada, the adult minimum wage rate varies by region, but there is only one standard adult minimum wage that is in effect in each region; that is, the adult minimum wage rate does not vary with skill level.

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