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From the minimum wage to living standards: components and trends

Adélaïde Favrat, Delphine Prady et Chloé Tavan

Summary

In 2011, workers earning the hourly minimum wage were more likely to be at the low end of the living-standards scale than other employees. Their living standards stood at a mere two-thirds of those of employees earning over 1.1 times the minimum wage. This differential reflects the fact that minimum-wage workers have less earned income, especially as they are more likely to work part-time and to experience jobless spells during the year. The tax and social-insurance system, however, tends to narrow the gap by raising the average living standard of minimum-wage workers by 8% and lowering that of workers paid above the minimum wage. Social benefits and employment-support measures account for a total 11% of minimum-wage workers' disposable income. On the other hand, the contribution of employment-support measures-the working tax credit (Prime Pour l'Emploi: PPE) and the work-related provisions of the earned-income supplement (Revenu de Solidarité Active: RSA)-is modest by comparison with the other components of minimum-wage workers' disposable income, owing to jobless spells and supplementary income received by their households, which excludes them from these means-tested benefits. The living standards of minimum-wage workers are, however, relatively diverse. Twenty-eight percent have a living standard above the median level. This is mainly due to the annual number of hours worked and spousal income contributions. Minimum-wage workers living in single-parent families have far lower living standards than people living in partnerships without children, despite fairly similar wage income. Between 1999 and 2012, for a given family configuration and a given number of hours worked, social-insurance and tax legislation boosted the real disposable income of minimum-wage households faster than the real minimum wage, by over 10% versus 7%. The implementation of measures to support the income of low-wage workers-the PPE in 2001 and the RSA...