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The Impact of Minimum Wages on Employment: Evidence from a Lower Middle-Income Country

Author

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  • Nguyen, Cuong Viet

Abstract

In this study, we examine the impact of minimum wages in Vietnam using individual-level data from the 2012-2020 annual Labor Force Surveys. During this period, the average real minimum wage increased by around 4% per year. Overall, we do not find significant effects from minimum wages on employment and monthly wages. However, we find a considerable negative effect on workers' total working hours. Working hours per week are reduced by 0.38% for a 1% increase in the minimum wage. Since total wages remain unchanged, a reduction in working hours results in an increase in hourly income. A 1% increase in the minimum wage leads to a 0.32% increase in hourly wages. Interestingly, for workers earning below minimum wage, we find a positive effect from minimum wages on their monthly income. A 1% increase in the minimum wage increases monthly income of workers earning below minimum wage by 0.83%.

Suggested Citation

  • Nguyen, Cuong Viet, 2023. "The Impact of Minimum Wages on Employment: Evidence from a Lower Middle-Income Country," GLO Discussion Paper Series 1253, Global Labor Organization (GLO).
    • Handle: RePEc:zbw:glodps:1253
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    More about this item

    Keywords

    Minimum wages; employment; labor productivity; impact evaluation; Vietnam;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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