The End of Decent Incomes for the Poor? the Fatal Link Between Minimum Wages and Social Benefits in World’s Most Developed Welfare States

Why is it that, in almost three decades since ‘Les Trentes Glorieuses’ , and despite growth of income, employment and high levels of social spending, even the richest and most developed welfare states in the world failed to make any further headway in the fight against income poverty? For the first time in the history of welfare states we no longer do observe any substantial progress towards the great and momentous post-war objective of eradicating poverty. In order to enhance our understanding of the poverty standstill, this paper assesses changes in (ratios between) social benefit levels, low wages and median household income.  We start from a double observation: a) low wages in general and minimum wages in particular constitute a ‘glass ceiling’ to vertical redistribution b) in many countries the incomes of households with children living on a single low wage fall short the poverty threshold. This suggests that the primary cause of household income poverty lies in the insufficiency of a single low wage for families with children. This points at a structural difficulty to reduce poverty through a more adequate and efficient social protection system. We aim to understand how this structural difficulty came about. The paper is based on the analysis of survey data (ECHP 1994-2001 and SILC 2005-2008 2012) and standard simulations of disposable household incomes of typical households.