Minimum Wages and Employment: Evidence from Cross-country and Cross-industry Heterogeneity

Description

This paper reassesses the employment effects of minimum wage increases by exploiting cross-country and cross-industry variation in the bindingness of minimum wages. Using country--industry panel data with fixed effects estimation, we find no significant effects on overall wage employment at either the extensive margin (number of employees) or the intensive margin (hours worked per employee). Instead, minimum wage increases are associated with higher self-employment and lower average working hours among the self-employed. Sectoral results show that disemployment effects are concentrated in tradable industries and are more pronounced in high-wage industries where minimum wages are less binding. These findings suggest that employment outcomes reflect the interaction between firms' ability to pass through higher labor costs and workers' incentives to enter the labor market. The results underscore the importance of industry-level heterogeneity and highlight the need to move beyond uniform minimum wage policies in both research and policy design.

Institutions

• Bank of Korea

  Seoul, Seoul

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