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Are Wage and Employment Effects Robust to Alternative Minimum Wage Variables?

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  • Sara Lemos

Abstract

A national minimum wage cannot explain variation in wages or employment across regions. Identification of the effect of the minimum wage separately from the effect of other variables on wages or employment requires regional variation. Many minimum wage variables with regional variation have been suggested in the literature. Such a variety of variables makes it difficult to compare estimates across studies. First, estimates using different minimum wage variables are not always calibrated to represent the effect of a 10% increase in the minimum wage on wages or employment. Second, different minimum wage variables might simply measure the effect of the minimum wage on different workers. Part of the controversial recent debate in the literature over the magnitude and direction of the employment effect might be that non-directly comparable estimates are being compared. This paper estimates and critically compares the effects of the minimum wage on both wages and employment using five minimum wage variables common in the literature: real minimum wage, “Kaitz index”, “fraction affected”, “fraction at” and “fraction below” the minimum wage. The data used is a Brazilian monthly household survey from 1982 to 2000. The estimates are robust and indicate that an increase in the minimum wage compresses the wages distribution with small adverse effects on employment.

Suggested Citation

  • Sara Lemos, 2004. "Are Wage and Employment Effects Robust to Alternative Minimum Wage Variables?," Discussion Papers in Economics 04/4, Division of Economics, School of Business, University of Leicester.
    • Handle: RePEc:lec:leecon:04/4
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    Cited by:

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    3. Bernhard Boockmann & Raimund Krumm & Michael Neumann & Pia Rattenhuber, 2013. "Turning the Switch: An Evaluation of the Minimum Wage in the German Electrical Trade Using Repeated Natural Experiments," German Economic Review, Verein für Socialpolitik, vol. 14(3), pages 316-348, August.
    4. Jones, Melanie K. & Jones, Richard J. & Murphy, Philip D. & Sloane, Peter J., 2007. "A Persistence Model of the National Minimum Wage," IZA Discussion Papers 2595, Institute of Labor Economics (IZA).
    5. Sara Lemos, 2007. "Minimum wage effects across the private and public sectors in Brazil," Journal of Development Studies, Taylor & Francis Journals, vol. 43(4), pages 700-720.
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    7. Paulina Broniatowska & Aleksandra Majchrowska & Zbigniew ¯ó³kiewski, 2015. "Does minimum wage reduce youth employment on regional labour markets in Poland?," Lodz Economics Working Papers 1/2015, University of Lodz, Faculty of Economics and Sociology.
    8. Carla Canelas, 2014. "Minimum Wage and Informality in Ecuador," WIDER Working Paper Series wp-2014-006, World Institute for Development Economic Research (UNU-WIDER).

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    More about this item

    Keywords

    minimum wage; wage effect; employment effect; Brazil;
    All these keywords.

    JEL classification:

    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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