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.
Introduction
The aim of this essay will be to examine and assess the role of
minimum wages in providing a safety net in Australia
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.
Conclusion
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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