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Whether the minimum wage is a good tool for poverty alleviation remains controversial. Still, it has proven politically impossible to reduce the minimum wage, which means that the only way to reduce its bite is to wait for inflation to eat the real minimum wage away, if this is you want. A minimum wage that is deemed to be too high then gradually gets back to an appropriate level. Of course, this assumes that there is positive inflation. What if there is deflation?
Ryo Kambayashi, Daiji Kawaguchi, and Ken Yamada look at Japan that has been characterized by some prolonged deflationary episodes. They look at the period from 1994 to 2003, where the cumulative inflation reached a whooping -0.5% (CPI) or 3-5% (median wages), a bit unfortunate that the sample for which wage data was available just happens to have little deflation to show. But the nominal minimum wage, which is set regionally, looks from the graphs to increase by about 12%, thus there is still a change in relative wages, like what could be seen in some other countries. The authors then find that the lower tail of wages is compressed, especially for women where half of this effect is attributable to job loss. This is not inconsistent with other studies.
Ryo Kambayashi, Daiji Kawaguchi, and Ken Yamada look at Japan that has been characterized by some prolonged deflationary episodes. They look at the period from 1994 to 2003, where the cumulative inflation reached a whooping -0.5% (CPI) or 3-5% (median wages), a bit unfortunate that the sample for which wage data was available just happens to have little deflation to show. But the nominal minimum wage, which is set regionally, looks from the graphs to increase by about 12%, thus there is still a change in relative wages, like what could be seen in some other countries. The authors then find that the lower tail of wages is compressed, especially for women where half of this effect is attributable to job loss. This is not inconsistent with other studies.
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