Age-differentiated minimum wages in developing countries |
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| Affiliation: | 1. University of California, Berkeley, USA;2. Northwestern University, USA;1. Key Laboratory for Microstructures, Shanghai University, Shanghai 200444, People׳s Republic of China;2. School of Materials Science & Engineering, Nanjing University of Science and Technology, Jiangsu 210094, People׳s Republic of China;1. University of Chile, Chile;2. University of York, United Kingdom;1. Department of Physical Geography and Geoecology, Faculty of Science, University of Ostrava, Chittussiho 10, 710 00 Ostrava, Czech Republic;2. Climatic Change and Climate Impacts (C3i), Institute for Environmental Sciences, 66 Boulevard Carl-Vogt, 1205 Geneva, Switzerland;3. Department of Earth Sciences, University of Geneva, Rue des Maraîchers 13, 1205 Geneva, Switzerland;1. Department of Civil and Environmental Engineering, The National University of Singapore, Block E1A, #07-03, No. 1 Engineering Drive 2, Singapore 117576, Singapore;2. Department of Civil and Environmental Engineering, The University of Utah, 110 Central Campus Drive 2000, Salt Lake City, UT 84112, USA |
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| Abstract: | The fact that minimum wages seem especially binding for young workers has led some countries to adopt age-differentiated minimum wages. We develop a dynamic competitive two-sector labor market model where workers with heterogeneous initial skills gain productivity through experience. We compare two equally binding schemes of single and age-differentiated minimum wages, and find that although differentiated minimum wages result in a more equal distribution of income, such a scheme creates a more unequal distribution of wealth by forcing less skilled workers to remain longer in the uncovered sector. We also show that relaxing minimum wage solely for young workers reduces youth unemployment but harms the less skilled ones. |
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