THE IMPACT OF LABOR MARKET REGULATION ON EMPLOYMENT IN LOW‐INCOME COUNTRIES: A META‐ANALYSIS

Controversy over labor market policy often centers on achieving a balance between preventing worker exploitation, and avoiding loss of productivity or employment through excessive regulation. Although the literature documenting the impact of labor market regulation on employment is extensive, there is a dearth of evidence on the impact of such policies in low‐income countries (LICs). Since it is easier for workers, especially women, to slip into the informal sector in LICs, regulations are likely to have stronger impacts on formal employment in these countries (but lower impacts on unemployment). We systematically reviewed available research from countries that are, or were until recently, LICs. Most studies document that more stringent labor regulations are associated with lower formal sector employment and higher informal sector employment. We also conducted a metaregression analysis of the impact of minimum wages on formal and informal employment. After controlling for publication bias, higher minimum wages are associated with lower formal employment and a higher share of informal workers.     

The Turnover‐Reducing Effects of the Minimum Wage may Harm the Economy

This article surveys the literature on the effects of the minimum wage and argues that the observed reduction in turnover rates is not necessarily desirable. If a curvilinear relationship exists between firm productivity and turnover, the effects of the minimum wage on reducing turnover may create a distance between the actual turnover rate and the optimal rate. Consequently, even if we accept the proposition that minimum wages have little impact on employment, they may reduce productivity or job growth in sectors not directly affected by the minimum wage.     

Can a minimum wage increase employment and reduce prices in a neoclassical perfect information economy?

This paper investigates the possibility that the imposition of a minimum wage increases employment in the affected sector, measured in terms of hours of work, and lowers product prices. Unlike related prior theoretical research, I consider a neoclassical perfect information economy. Both labor and product markets are assumed to be perfectly competitive. Workers choose the number of hours of work and their effort level. Workers can potentially, but not necessarily, differ in their preferences over income, leisure, and effort. Effort is perfectly observable by the employers. The general framework that highlights the channels through which a minimum wage can increase employment and reduce prices is introduced and necessary and sufficient conditions derived. The paper also develops a number of comparative statics and some illustrative examples. The results provide a simple theoretical foundation that explains some recent findings of the empirical literature on minimum wages. Auxiliary results help explain the effects of minimum wage on the entire wage distribution in a way that is consistent with empirical findings. Finally, welfare analysis shows that worker welfare and employment tend to go in opposite directions; in particular, if employment increases after the imposition of the minimum wage, worker welfare will be reduced, though not necessarily vice versa (the opposite is true for consumer welfare). Strikingly, if a minimum wage increases worker welfare, the chief beneficiaries are not the affected workers but those with incomes that exceed the minimum wage.     

Minimum wage effects in a developing country

The available empirical minimum wage literature, which is mostly based on US evidence, is not very useful for analyzing developing countries, where the minimum wage affects many more workers and labour institutions and law enforcement differ in important ways. The main contribution of this paper is to present new empirical evidence on minimum wage effects for a large developing country, Brazil. Using a monthly household survey panel from 1982 to 2004 I find evidence of a wage compression effect for both the formal and informal sectors. Furthermore, I find no evidence of employment effects in either sector.     

最低工资对正规部门、非正规部门工资和就业的影响

本文根据是否遵守最低工资标准,将劳动部门分为正规部门和非正规部门。利用中国健康与营养调查（CHNS）微观数据,运用固定效应模型和Multinomial Logit模型,本文实证研究了2004年以来,最低工资对正规部门和非正规部门工资和就业的影响。研究发现：最低工资每提高1%,正规部门工资会增加0.5%,非正规部门平均工资下降统计不显著,而处于最低工资线附近的非正规部门劳动者工资下降0.77%;最低工资提高使得失业者向非正规部门流动,而非正规部门劳动者向正规部门流动,最终将有利于劳动者在正规部门就业。因此,政府在制定最低工资制度时应全面考虑最低工资标准作用效果的部门差异。     

THE IMPACT OF IMMIGRATION ON THE LABOR MARKET

The literature on the impact of immigration on the labor market is highly controversial. The aim of this paper is to review the existing literature and draw some general conclusions on how wages and employment respond to immigration. Economic studies indicate that the impact of immigration on the average wage and employment of native workers is null or slightly positive. However, because adjustments take time, the immediate labor market effects of unexpected (as opposed to expected) migration episodes can be detrimental. Immigration also can have distributional consequences. In particular, the skill composition of immigrants matters in determining their impact on native labor market outcomes. An inflow of immigrants will tend to reduce the wages of competing native workers (with skills similar to those of the migrants), and increase those of complementary workers (with skills that complement those of immigrants). By affecting the skill composition of the workforce, immigration can create winners and losers among native workers via changes in the wage structure.     

The London Business School with Gower Publishing: Forecast Release: EARNINGS AND UNEMPLOYMENT IN THE CAR INDUSTRY: THE BEST AND WORST OF BRITISH INDUSTRY

The Chancellor has described the cost in terms of lost output and higher unemployment of getting inflation down as ‘well worth paying’. Yet the trade-off so far is a miserable 1.25 per cent off the underlying rate of growth of earnings for an unemployment increase approaching 600,000, some 2–3 per cent off the underlying rate of inflation for a 3 per cent drop in GDP and a 7 per cent fall in manufacturing output. The question is clear: why is it that in the UK we seem to have to pay such a high price in terms of lost output and higher unemployment to make only modest progress on reducing wage and price inflation? One possible answer is in terms of the NAIRU; another stems from the way in which we measure retail price inflation. Using the example of the car industry as a backdrop, we examine the relationship between unemployment and inflation and ask whether there is a role for government to play in improving the trade-off. Our conclusion is that the present non-interventionist stance is probably appropriate but that the government should be doing more to educate both sides of the wage bargain - a challenge picked up by the Prime Minister in his recent speech to the CBI. This is especially appropriate at the present time, because price inflation is falling but wage inflation is lagging behind. It is not a cut in real wages that is required but an equi-proportionate deceleration in both wages and prices. By joining the ERM, we will ultimately obtain German rates of inflation; low wage settlements would both shorten the time-scale and reduce the unemployment cost of convergence.     

THE 1990-91 WAGE ROUND

The 1990-91 pay round could hardly have started against a less propitious background. Retail price inflation -still the principal target for wage negotiators despite its unreliability as a measure of inflation -is at 10 per cent and rising. The shock to oil prices will boost prices and add to wage demands -the natural desire to seek recompense in higher wages will be little impressed by the economist's argument that it is not possible to offset the real income shock to oil consumers by raising nominal incomes. And while cost pressures are pushing up prices, almost every other factor is working in the opposite direction. Domestic demand is at last responding to high interest rates, while the recovery in the pound has worsened UK competitiveness by 10 per cent since the start of the year and this is now taking its toll of exports, hitherto the only buoyant component of demand. The CBZ is warning forcibly that recession is beckoning. How will wages respond to a situation where a backward-looking view points to higher settlements but a forward-looking view indicates the need for wage moderation?     

WHAT IS THE EFFECT OF HOUSEWORK ON THE MARKET WAGE,AND CAN IT EXPLAIN THE GENDER WAGE GAP?

Abstract Does housework reduce the market wage, and if so, does it have a similar impact for males and females? In this paper, we survey and evaluate the recent and growing empirical literature on the linkages between housework and the wage rate. The review is motivated by unexplained gender wage gaps across studies, which consider personal and market‐related factors. We focus on this less‐studied aspect of wage determination. We consider the required modelling framework, and provide standardized estimated effects of housework on the hourly wage across studies. We evaluate how this literature has addressed potential estimation problems, in particular, the endogeneity of housework, concavity of the housework–wage function, threshold effects and work effort effects. We conclude that the evidence across ordinary least squares, instrumental variable, fixed effects and two‐stage least squares results casts serious doubt on the idea that the negative female housework–wage relationship is only driven by endogeneity bias or individual‐specific characteristics. Yet, much more needs to be done to address modelling and data requirements, and we point out likely and promising future research directions.     

Employment,Inequality and the UK National Minimum Wage over the Medium‐Term*

We assess the impact of the national minimum wage (NMW) on employment and inequality in the UK over the decade since its introduction. We evaluate its effects in each year, using an incremental differences‐in‐differences (IDiD) estimator. Identification is based on variation in the bite of the NMW across local labour markets and the different sized year on year up‐ratings. We find that an increased bite of the NMW is associated with falls in lower tail wage inequality. While the average employment effect over the entire period is broadly neutral, there are small but significant positive NMW effects from 2003 onwards.     

The effect of minimum wage hikes on employment: Evidence from regional panel data from Romania

Minimum wage hikes aim to increase the income of low-wage workers and improve their labour market participation. However, there are concerns that large increases may reduce employment, especially in countries where minimum wages increased quickly and whose competitiveness depends, at least partly, on low production costs. This study examines the employment effect of large increases in the minimum wage in Romania between 2008 and 2016. It uses regional (NUTS III) data and dynamic panel methods. The results do not support the hypothesis that minimum wage hikes reduce employment. They are robust to the use of different econometric methods, plausible variations of the specification and definitions of the key variables. Moreover, the results suggest insignificant effects even for low wage, less developed or high unemployment regions.     

The verdict on the minimum wage: guilty on all counts

Some recent research in the US has challenged the long-held view among economists that raising the minimum wage reduces employment. However, most economists continue to hold to the orthodox view, which continues to be confirmed in academic journals. Furthermore, research continues to find other negative effects from the minimum wage that are sufficient to oppose it even if there is no loss of employment.     

Minimum wages,wages and employment in various sectors in Honduras

This paper contributes to our understanding of the impact of minimum wages on labor markets of developing countries, where there are often multiple minimum wages and compliance is weak. We examine how changes in more than 22 minimum wages over 1990–2004 affect employment, unemployment and average wages of workers in different sectors, defined by coverage under the legislation. The evidence suggests that minimum wages are effectively enforced only in medium and large-scale firms, where a 1% increase in the minimum wage leads to an increase of 0.29% in the average wage and a relatively large reduction in employment of ? 0.46%. We find that public sector wages emulate minimum wage trends but the higher cost of labor does not reduce employment there. There are no discernable effects of minimum wages on the wages of workers in small-firms or the self-employed; yet, higher minimum wages may create more unemployment. We conclude that (even under our upper bound estimate of the effect on the wages of workers) the total earnings of workers in the large-firm covered sector fall with higher minimum wages in Honduras, which warrants a policy dialogue on the structure and level of minimum wages.     

Accounting for wage and employment changes in the US from 1968–2000: A dynamic model of labor market equilibrium

In this article, we present a unified treatment of and explanation for the evolution of wages and employment in the US over the last 30 years. Specifically, we account for the pattern of changes in wage inequality, for the increased relative wage and employment of women, for the emergence of the college wage premium and for the shift in employment from the goods to the service-producing sector. The underlying theory we adopt is neoclassical, a two-sector competitive labor market economy in which the supply of and demand for labor of heterogeneous skill determines spot market skill rental prices. The empirical approach is structural. The model embeds many of the features that have been posited in the literature to have contributed to the changing US wage and employment structure including skill-biased technical change, capital-skill complementarity, changes in relative product-market prices, changes in the productivity of labor in home production and demographics such as changing cohort size and fertility.     

The Outlook for Wages

Price inflation is on the way down The most dramatic evidence of this is the fall in retail price inflation as the VAT effect comes out of the index. But as the Charts overleaf show, there are clear signs of a fall in inflation rates in wholesale output prices and, more strikingly still, in manufacturers' input prices.
This may be good news for consumers, but so far any reduction in inflation has been chiefly at the expense of profit margins as price rises have fallen below the increase in wage costs. The question for the immediate future is whether the fall in price inflation will now lead to a fall in wage inflation     

Trade Boards and minimum wages, 1909-39

Trade Boards were first established in 1909 principally to protect workers in the sweated trades'but were vastly extended under new criteria in 1918. Although the interwar Trade Boards set wage minima which were'tough'by modern standards there has been little analysis of their effects on employment. But in one sector, agriculture, there is clear evidence that minimum wage setting cost jobs. If similar effects occurred in other sectors covered by minimum wages then this could have added significantly to the burden of unemployment during the interwar years.     

The distribution of changes in manufacturing employment and the impact of the minimum wage

That employment for workers in durable goods industries is more sensitive to the pace of economic activity than for non-durable goods employees is not a surprising result. What is noteworthy about the conclusions of this study, however, is the manner in which increases in the minimum wage have altered the distribution of employment and sensitivity to short-run changes in employment of production workers in manufacturing industries. By focusing on the distribution of employment and how that distribution changes over the cycle, estimates of some aspects of the impact of the minimum wage that have not previously been analyzed have been developed.The evidence indicates that increases in the minimum wage over the period 1947–1975 have had a significant impact on employment patterns. Minimum wage legislation has had the effect of decreasing the share of projected employment and increasing vulnerability to cyclical changes in employment for the group of workers most ‘marginal’ to the work force low-wage industry employees. Hence, as a result of increased minimum wages, low-wage industry employees are able to obtain fewer jobs during periods of normal employment growth and their jobs are less secure in the face of short-run employment variations.Minimum wage legislation has undoubtedly resulted in higher wages for some of the relatively-low-productivity workers who were able to obtain employment than these workers would have received in its absence. The cost in terms of lost employment opportunities and cyclical vulnerability of jobs, however, has apparently been borne most heavily by low-wage industry employees. The primary beneficiaries of the shifts in the pattern of employment shares occasioned by minimum wage increases were high-wage industry workers, particularly in the ordnance, food, tobacco, and petroleum industries.     

A New Keynesian model with staggered price and wage setting under learning

This paper provides a study of the implications for economic dynamics when the central bank sets its nominal interest rate target in response to variations in wage inflation. I provide results on the existence, uniqueness, and stability under learning of rational expectations equilibrium for alternative specifications of the manner in which monetary policy responds to economic shocks when nominal rigidities are present. Monopolistically competitive producers set prices via staggered price contracts, and households set nominal wages in the same fashion. In this setting, the conditions for determinacy and learnability of rational expectations equilibrium differ from a model where only prices are sticky. I find that when the central bank responds to wage and price inflation and to the output gap, a Taylor principle for wage and price inflation arises that is related to stability under learning dynamics. In other words, a moderate reaction of the interest rate to wage inflation helps to avoid instability under learning and indeterminacy.     

Labour market institutions and employment in France

The purpose of this paper is to use individual data to study how the minimum wage and the welfare system combine to affect employment in France. Using the 1997 Labour Force Survey, we decompose non‐employment of married women into three components: voluntary, classical (due to the minimum wage) and ‘other’ (a residual category). We find that the minimum wage explains close to 15% of non‐employment for these women and that the disincentive effects of some welfare policy measures may be large. Our approach also allows us to evaluate various labour and welfare policy experiments in their effects on participation and employment. Copyright © 2002 John Wiley & Sons, Ltd.     

Firms' price and wage adjustment in Europe: Survey evidence on nominal stickiness

This paper presents new evidence on the patterns of price and wage adjustment in European firms and on the extent of nominal rigidities. It uses a unique dataset collected through a firm-level survey conducted in 17 European countries and covering various sectors. Several conclusions are drawn from this evidence. Firms adjust wages less frequently than prices, on average every 15 and 10 months, respectively. Price and, especially, wage adjustment exhibit a substantial degree of time-dependence. In particular, wage changes tend to cluster at a specific time of the year, mostly January in the majority of countries. The results of a multivariate analysis indicate that prices are more flexible when competitive pressures in product markets are strong and when labor costs account for a lower fraction of firms' total costs, whereas wages are more flexible when bargaining is decentralized and when the coverage of collective bargaining and the stringency of employment protection legislation are low. Price rigidities are higher in firms with a larger share of high-skilled/white-collar workers.