Do minimum wages reduce employment sand training?

Issue Date

5-2008

Abstract

This paper examines minimum wage effects on employment and training provision for various workers in different kinds of firms using unique firm-level data. The results show negative effects on unskilled workers but not on skilled ones, with the adverse effects more severe in small firms. Minimum wages also reduce in-house training for unskilled workers while the effects on skilled workers are mixed. The findings suggest that having been forced to pay higher wages because of binding and increasing minimum wages, firms reduce hiring and training of unskilled workers, leaving them unemployed and untrained. This should be of utmost concern as firms seem to adopt a short-term policy at a long-term cost for unskilled workers, further exacerbating unemployment and poverty. Moreover, the crucial role of firm characteristics in determining the adverse effects of minimum wages has raised reservations regarding previous studies that have used data from household or labor force surveys, which do not take this issue into account. © 2008 by Asian Development Bank.

Source or Periodical Title

ERD Working Paper Series

ISSN

16555252

Page

1943-01-01

Document Type

Article

College

College of Economics and Management (CEM)

Language

English

Digital Copy

YES

Link to Full Text

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