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Do Minimum Wages Reduce Inequality? Evidence from India

Author

Listed:
  • Saloni Khurana

    (IIFT andWorld Bank, 1818 H Street, NW, Washington, DC 20433 USA)

  • Kanika Mahajan

    (Ashoka University, Rajiv Gandhi Education City, Haryana, India, 131029.)

  • Kunal Sen

    (UNU-WIDER, Katajanokanlaituri 6 B FI-00160 Helsinki, Finland & University of Manchester.)

Abstract

Using nationally representative data on employment and earnings, this paper documents a fall in wage inequality in India over the last two decades. It then examines the role played by increasing minimum wages for the lowest skilled workers in India in contributing to the observed decline. Exploiting regional variation in changes in minimum wages over time in the country, we find that a 1% increase in minimum wages led to a 0.17% increase in wages for workers in the lowest quintile. This effect is smaller at upper wage quintiles and insignificant for the highest wage quintile. Counterfactual wage estimations show that the increase in minimum wages explains 26% of the decline in wage inequality in India during 1999-2018. These findings underscore the important role played by rising minimum wages in reducing wage disparities in India.

Suggested Citation

  • Saloni Khurana & Kanika Mahajan & Kunal Sen, 2025. "Do Minimum Wages Reduce Inequality? Evidence from India," Working Papers 139, Ashoka University, Department of Economics.
    • Handle: RePEc:ash:wpaper:139
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    File URL: https://dp.ashoka.edu.in/ash/wpaper/paper139_0.pdf
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