Minimum Income Protection for Workers

Abstract

Abstract Chapter 3 looks at what makes for adequate minimum income protection for workers—or, more exactly, people mainly reliant on earned income. The chapter looks at income protection guaranteed to workers who are full-time employed at the minimum wage, as an idealtypical benchmark case. The situation of minimum wage earners is a useful indicator to gauge the protection guaranteed to workers in general, as it should in principle be ‘the least favourable’. The chapter sketches the history of the minimum wage, its determinants, and employment effects, and discusses the variation in the level and relevance of minimum wages in the overall wage distribution. Building on hypothetical household simulations, the chapter analyses in depth the adequacy and design of the different policy instruments, such as taxes, child benefits, and in-work benefits, that together define the adequacy of the minimally guaranteed net disposable income for a full-time minimum wage worker and his or her family. Clearly, there are problems with the selection of a hypothetical full-time minimum wage worker as an idealtypical representative of the in-work income floor. For that reason the chapter expands its analysis by simulating and discussing the level of the guaranteed income to workers with more spotty and piecemeal labour market attachment. Finally, the chapter assesses the link between in-work income floors and poverty, and lists which policy instruments appear to be most relevant in guaranteeing adequate minimum income protection packages for the working population.