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1 – 10 of over 5000Arnab K. Basu, Nancy H. Chau and Zahra Siddique
We study the impact of tax and minimum wage reforms on the incidence of informality. To gauge the incidence of informality, we use measures of the extent of tax evasion, the…
Abstract
We study the impact of tax and minimum wage reforms on the incidence of informality. To gauge the incidence of informality, we use measures of the extent of tax evasion, the extent of minimum wage noncompliance, and the size of the informal workforce. Our approach allows us to examine (i) the distinction between determinants of firm-level reported wage distribution and actual wage distribution, (ii) the complementarity of tax and minimum wage enforcement, (iii) the impact that a minimum wage reform has on tax and minimum wage compliance, and (iv) the impact that a tax policy reform has on tax and minimum wage compliance. We conclude with the design of optimal minimum wage and tax policies (even in the complete absence of minimum wage enforcement). We do so based on two objectives derived from popular concerns associated with an unchecked expansion of informality: tax revenue maximization, and poverty alleviation among workers.
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In the US minimum wages were initially enacted by individual states, beginning with the Commonwealth of Massachusetts in 1912. These laws were modeled on legislation enacted over…
Abstract
In the US minimum wages were initially enacted by individual states, beginning with the Commonwealth of Massachusetts in 1912. These laws were modeled on legislation enacted over the previous two decades in Australia, New Zealand, and England (Fisher, 1926, chap. 8; Hammond, 1915, 1913; Hobson, 1915; Hart, 1994, chaps. 2 & 3; Morris, 1986). From 1912 to 1923, the legislatures of 16 states, Puerto Rico, and the District of Columbia passed minimum wage legislation, although not all of them were operational by the end of this period (Brandeis, 1935, p. 501; Clark, 1921; Millis & Montgomery, 1938, chap. 6; Morris, 1930, chap. 1).
The purpose of this study is to examine whether participating informality is attributed to income shocks such as wage arrears, unexpected wage cuts or compulsory unpaid leaves…
Abstract
Purpose
The purpose of this study is to examine whether participating informality is attributed to income shocks such as wage arrears, unexpected wage cuts or compulsory unpaid leaves. The current research uses Russia longitudinal Monitoring Survey 2002–2015.
Design/methodology/approach
Using formal jobs as the base category, the authors conducted pooled multinomial logit regressions allowing for the two additional employment statuses: workers without contracts and unincorporated business workers.
Findings
The overall results mainly suggest that no effects occur. In other words, unexpected negative income shocks are not the main driving force of informality. Although the majority of previous studies are based on survey questions on unexpected income shock which has sample selection bias, to obtain robustness, the current study used Russian minimum wage reforms as income shocks. This research shows that Russian minimum wage reform does not affect the decision of informality in the labor market.
Research limitations/implications
Given the data limitations, the authors only observed and examined the supply-side of the labor market. Tax-evading motives would be the main reason for informality; to ensure this conjecture, however, demand and supply sides need to be simultaneously examined which is beyond the scope of this study.
Originality/value
In contrast to a large number of studies on cross-sectional differences in determinants of informal job holding, emphasis on the effects of income shocks on informal employment across business cycles has been minimal. The current study focuses on the business cycles because trends of informal employment can be interpreted differently regardless of whether in an economic boom or recession. Russia, as a unique natural experiment, provides us to examine informal job holdings over the business cycle.
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Meltem Dayioglu, Müşerref Küçükbayrak and Semih Tumen
Using a regression discontinuity design in tandem with a difference-in-discontinuities analysis, the study finds that increasing the minimum wage reduces the employment…
Abstract
Purpose
Using a regression discontinuity design in tandem with a difference-in-discontinuities analysis, the study finds that increasing the minimum wage reduces the employment probability of young males by 2.5–3.1 percentage points.
Design/methodology/approach
The authors exploit an age-specific minimum wage rule – which sets a lower minimum wage for workers of age 15 than the adult minimum wage paid to workers of age 16 and above – and its abolition to estimate the causal effect of a minimum wage increase on youth employment and education in Turkey.
Findings
The authors also document that, initially, the minimum wage increase does not lead to a major change in high school enrollment, while the likelihood of transitioning into “neither in employment nor in education and training” (NEET) category notably increases. However, in the medium term, the NEET effect is transitory; school enrollment increases over time and absorbs the negative employment effect.
Originality/value
The authors argue that policy effects have mostly been driven by demand-side forces rather than the supply side.
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The minimum wage has been regarded as an important element of public policy for reducing poverty and inequality. Increasing the minimum wage is supposed to raise earnings for…
Abstract
The minimum wage has been regarded as an important element of public policy for reducing poverty and inequality. Increasing the minimum wage is supposed to raise earnings for millions of low-wage workers and therefore lower earnings inequality. However, there is no consensus in the existing literature from industrialized countries regarding whether increasing the minimum wage has helped lower earnings inequality. China has recently exhibited rapid economic growth and widening earnings inequality. Since China promulgated new minimum wage regulations in 2004, the magnitude and frequency of changes in the minimum wage have been substantial, both over time and across jurisdictions. The growing importance of research on the relationship between the minimum wage and earnings inequality and its controversial nature have sparked heated debate in China, highlighting the importance of rigorous research to inform evidence-based policy making. We investigate the contribution of the minimum wage to the well-documented rise in earnings inequality in China from 2004 to 2009 by using city-level minimum wage panel data and a representative Chinese household survey, and we find that increasing the minimum wage reduces inequality – by decreasing the earnings gap between the median and the bottom decile – over the analysis period.
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Olivier Bargain and Karina Doorley
In-work transfers are often seen as a good trade-off between redistribution and efficiency as they alleviate poverty among low-wage households, while increasing financial…
Abstract
In-work transfers are often seen as a good trade-off between redistribution and efficiency as they alleviate poverty among low-wage households, while increasing financial incentives to work. In the context of the recent economic downturn, they have been advocated to offset the disincentive effect of wage cuts and to cushion the negative redistributive impact of earnings losses and cuts in the minimum wage. We study this double effect for Ireland, a country deeply affected by the economic crisis, and for which existing in-work support policies are of limited scope. The employment and poverty effects of alternative policies are analysed thanks to counterfactual simulations built using a micro-simulation model, the Living in Ireland Survey 2001 and labour supply estimations. We focus on an extension of the existing scheme, the Family Income Supplement and its replacement by the refundable tax credit in force in the United Kingdom.
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Recent empirical studies have improved methodologies for identifying the causal effects of policies especially on a minimum wage hike. This study identifies causal effects of…
Abstract
Recent empirical studies have improved methodologies for identifying the causal effects of policies especially on a minimum wage hike. This study identifies causal effects of minimum wage hikes across 47 prefectures in Japan from 2008 to 2010 on employment, average hourly wage, work hours, full-time equivalent employment (FTE), total wage costs, average tenure, separation and new hiring in establishments using a micro dataset of business establishments in restaurant, accommodation, and food takeout and delivery industry. Various regression specifications including controls for time-varying regional heterogeneity are implemented by using the bite of the minimum wage in each establishment. First, this study finds that the effects of a revision of minimum wage on employment and FTE in the establishment are statistically insignificant, but the effects on hourly wages and total wage costs are statistically significant. Subsequently, it considers how the establishments react to the increase in total wage costs caused by the revised minimum wage, and finds that separation from the establishment may decrease, and average tenure of workers may increase.
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The purpose of this paper is to provide a comprehensive portrait of who earns the minimum wage, in terms of the characteristics of the individual that are most important in…
Abstract
Purpose
The purpose of this paper is to provide a comprehensive portrait of who earns the minimum wage, in terms of the characteristics of the individual that are most important in determining this outcome.
Design/methodology/approach
This study uses individual data from the Annual Income Supplements of the New Zealand (NZ) Household Labour Force Surveys between June 1997 and June 2004. This unit record data allows isolation of workers earning the minimum wage or close to it. A more sophisticated quantitative analysis is also carried out, where the probability of earning at or below the minimum wage is modelled to estimate what individual characteristics are most significant in determining minimum wage status.
Findings
One of the key findings was that individual characteristics (such as age) are much more important than household circumstance or industry affiliations, in terms of the probability of earning minimum wage.
Originality/value
NZ has substantially increased minimum wages for teenagers and adults since 2000. For example, since the youth minimum was introduced in March 1994, it had increased by 52 per cent in real terms by 2004. Consequently, recent NZ experience offers a rare opportunity to isolate who earns the minimum wage and which subgroups are more likely to be potentially impacted by a rising minimum.
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Hartmut Lehmann and Konstantinos Tatsiramos
Informality and informal employment are widespread and growing phenomena in all regions of the world, in particular in low and middle income economies. A large part of economic…
Abstract
Informality and informal employment are widespread and growing phenomena in all regions of the world, in particular in low and middle income economies. A large part of economic activity in these countries is not registered or under-declared and many workers enter employment relationships that do not provide any or only partial protection. Causes and consequences of informality in these regions have recently received growing attention, with a particular emphasis on the role of institutions. Several competing paradigms about informality and informal employment exist in the literature. The traditional dualistic view sees the informal segment as the inferior sector, the option of last resort. Due to barriers to entry, minimum wages, unions or other sources of segmentation, formal jobs are rationed. Workers in the informal sector are crowded out from the formal sector involuntarily, their wage being less than that in the formal sector. In contrast, the competitive view sees the formal and informal labor markets not segmented, but integrated. Voluntary choice regarding jobs and particular attributes of these jobs, such as flexible hours, working as a self-employed and being one's own boss as a micro-entrepreneur, and not valuing social security benefits, can be the reasons for remaining in or moving to the informal sector. A third paradigm points to segmentation within the informal sector. Embedding theoretical and empirical analysis of informality and informal employment in low and middle-income countries into the literature helps us to better characterize the labor markets in these countries.
Varuna Dreepaul-Dabee and Verena Tandrayen-Ragoobur
This paper aims to examine the employment effect of the minimum wage in Mauritius, a country that has recently introduced an economy-wide national minimum wage. As women have low…
Abstract
Purpose
This paper aims to examine the employment effect of the minimum wage in Mauritius, a country that has recently introduced an economy-wide national minimum wage. As women have low labor force participation rate and higher unemployment rate compared to men, this study sheds light on the impact of the national minimum wage on male and female employment.
Design/methodology/approach
A conceptual framework based on the labor–leisure model of Blundell et al. (2007) incorporating the minimum wage as an important variable influencing the employment decision of the individual serves as the methodological backdrop of this paper. It applies the difference-in-difference estimation technique and uses micro data from the Continuous Multi-Purpose Household Survey for the period 2017–2019.
Findings
The results show that minimum wage has a significant negative impact on overall employment. With the imposition of the national minimum wage, the probability that an individual, currently earning less than the minimum wage, remains employed is 0.525 lower than that of a worker earning above the minimum wage level. Moreover, using sex-disaggregated data, the analysis demonstrates the negative employment effects of the minimum wage adversely impact women more than men.
Originality/value
This is a first attempt to estimate the effect of the newly introduced national minimum wage on employment in Mauritius. While the effects of a minimum wage vary across different segments of the economy, this study adopts a gender perspective by comparing the impact of the minimum wage on male and female employment.
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