Minimum Wages and Firm Productivity: Evidence from Vietnamese Manufacturing Firms

ABSTRACT

This paper empirically examines the minimum-wage impact on firm productivity. Using a detailed Vietnamese firm-level dataset from 2010 through 2015, the regression results suggest that firms raise their labor productivity, total factor productivity, capital intensity and revenue in response to increased minimum wage standards. Firms that pay their workers below the minimum wage react more positively in raising their labor productivity than high-wage firms. Minimum wages has had a more pronounced impact on firms’ labor productivity, total factor productivity and capital intensity since the uniform wage rate was introduced for both domestic private and foreign-invested enterprises in 2012.