This paper studies the effect that the September 2003 increase in monthly minimum wage (RMV) from S/.410 to S/.460 had upon employees in metropolitan Lima. The analysis shows evidence that the increase in the RMV contributed to wage hikes among workers in the formal sector, workers who had a secondary education, young workers between the ages of 14 and 24, and those workers who earned a monthly wage of between S/.410 and S/.460. There is no evidence that the increase in the RMV incurred significant costs in terms of job destruction, however it did heighten the vulnerability of workers in the formal sector with monthly earnings between S/.370 and S/.450 –approximately 3% of the working population. Finally, evidence emerged that an adjustment mechanism of the labor market in response to the increase in RMV was to increase the number of working hours demanded of employees (particularly among young workers between the ages of 14 and 24 and workers with a secondary school education or less); this was not however accompanied by transfer to the informal sector.
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