Implications of Minimum Wage Increases on Labor Market Dynamics : Lessons for Emerging Economies

Del Carpio, Ximena V. ; Pabon, Laura M.

World Bank, Washington, DC

关键词: MINIMUM WAGE;    LABOR MARKET;    EMERGING ECONOMIES;    FIRM PERFORMANCE;    EMPLOYMENT;   

DOI  :  10.1596/1813-9450-8030
RP-ID  :  WPS8030

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

This paper offers evidence on therelationship between the minimum wage and unemployment andinformal employment, and identifies some of the lessonslearned on the potential effects of increasing the minimumwage. Most of the evidence suggests that sizable increasesin the minimum wage are likely to exacerbate unemploymentand the prevalence of informal employment, which could havenegative consequences for labor productivity and businessesas a result of reduced investment in employee training andloss of productive workers. This outcome occurs whenbusinesses adopt the main channels available for absorbingincreased labor costs. The majority of the empiricalevidence suggests that the effects of minimum wage increaseson unemployment and the demand for labor are unclear. Theoutcome depends in large part on the specificcharacteristics of the labor markets and the degree ofcompliance with the minimum wage law. Most of those affectedby minimum wage increases are less qualified workers. InLatin American and Asia, differences in the effects ofminimum wage increases depend largely on the size and typeof firms. In countries with high levels of informalemployment, minimum wage increases can increase informalemployment, since the formal workers who lose their jobs areabsorbed by the informal sector of the economy. In general,businesses have five mechanisms for absorbing the addedlabor costs. Given the characteristics of the labor marketin emerging economies, it is likely that businesses facedwith increased labor costs will resort to less than optimalchannels, which will tend to affect their productivity andthe labor market in general.