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Is Work the Best Antidote to Poverty?

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Abstract:

Employment reduces considerably the poverty risk, but does not solve all problems. On average in the OECD area, 7% of individuals living in households with at least one worker are poor. And while in‐work poverty is often related to insufficient work participation, resulting from very short part‐time work or very short employment spells over the year, there are other important factors at work. In particular, poverty rates are higher for families with children. Thus, fighting in‐work poverty requires implementing targeted policy responses. In this respect, social transfers play a key role, precisely because they can be targeted towards the most vulnerable households: on average in the OECD area, they reduce by almost half the rate of in‐work poverty. Among these transfers, in‐work benefit schemes can be particularly effective, if they are well conceived and combined with a binding minimum wage set ‐ by law or collective agreements ‐ to a moderate level. Conversely, since the risk of in‐work poverty is much less related to hourly wage rates than it is with working time, employment duration or household composition, the minimum wage cannot constitute the main element of an effective strategy to alleviate in‐work poverty.

Document Type: Review Article

Publication date: September 1, 2009

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