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Minimum wage and self-employed business owners: Evidence from South Korea

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  • Ahn, Taehyun

Abstract

This study examines the influences of minimum wage on self-employment exits, using recent changes in the minimum wage level in South Korea. Using the cross-industry variation on the impact of the minimum wage—the proportion of workers whose wages are below the minimum wage in the upcoming year—combined with individual longitudinal data, I estimate the model of self-employment exits. Overall, the estimates show that the minimum wage hike has no significant impact on self-employed workers. However, it increases the likelihood of the business closing for the self-employed who hire employees. The results imply that a ten percent increase in the minimum wage raises the exit probability by 2.6 percentage points, which is 30.9 % of the average exit rate for those with employees. Moreover, the exits are significantly associated with the transition to non-employment.

Suggested Citation

  • Ahn, Taehyun, 2024. "Minimum wage and self-employed business owners: Evidence from South Korea," Labour Economics, Elsevier, vol. 88(C).
    • Handle: RePEc:eee:labeco:v:88:y:2024:i:c:s0927537124000344
    DOI: 10.1016/j.labeco.2024.102539
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    More about this item

    Keywords

    Minimum wage; Self-employment; Business owners;
    All these keywords.

    JEL classification:

    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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