Setting a minimum wage solves inequality

This evidence also provides us with many policy implications that help us determine best practices for shaping fiscal policy in developed countries. First of all, according to the evidence seen here, setting a minimum wage to $11.77 would provide the lowest level of income inequality. This shows that for many of the OECD nations, they would be able to help decrease inequality within their country by raising the minimum wage even by a small amount, although there are some countries that have overshot the maximum effectiveness value. The second policy implication from this research is found in the fact that we used the real values of the minimum wage. By seeing that higher real values of the minimum wages decrease inequality, we can state that lower real values of the minimum wage increase inequality. Therefore creating policy to keep a constant real value of the minimum wage will stop inequality from increasing, thereby leading to a more prosperous economy. Looking at this research shows how developed economies can benefit from not only increasing their minimum wages, but also stopping their real value from decreasing. This implies a policy of having the minimum wage increase with inflation would help to keep income inequality from rising further.

Overall, we can conclude that increases to the real value of the minimum wage affect income inequality by redistributing wealth, primarily from the people who buy goods made by minimum wage workers and the stakeholders of companies that higher minimum wage workers. Although we do notice the potential for some disemployment effects when the minimum wage becomes too high, caused by a redistribution of wealth from some low-wage workers losing their jobs to other low-wage workers who continue to work after the minimum wage increase, this effect is not being seen by any OECD country currently due to the need for the minimum wage to be set extremely high for this to occur. Changing policy to reflect these findings would help improve the economy by creating a more equal society and thereby improving the general quality of life.