IDEAS home Printed from https://ideas.repec.org/a/vrs/izajlp/v10y2020i1p41n16.html
   My bibliography  Save this article

Heterogeneous effects of minimum wage on labor market outcomes: A case study from Turkey

Author

Listed:
  • Işık Enes
  • Orhangazi Özgür
  • Tekgüç Hasan

    (Department of Economics, Kadir Has University, Cibali34083Istanbul, Turkey)

Abstract

We assess the effects of a sharp minimum wage increase on wages, informality, and employment in Turkey, a large developing economy with one of the highest minimum wage-to-average wage ratios among OECD countries and widespread discrepancies between labor market outcomes of women and of men. We look at the quasi-experimental 2016 minimum wage increase and pay attention to identifying information coming from demographic groups. We find that the increase in the minimum wage had an economically substantial and statistically significant positive impact on wages. Despite the positive wage effects of the increase, we find no negative employment effects. However, we show that the minimum wage increase may have caused an increase in the share of informal employment among workers with less than tertiary education, especially for such workers working for small firms.

Suggested Citation

  • Işık Enes & Orhangazi Özgür & Tekgüç Hasan, 2020. "Heterogeneous effects of minimum wage on labor market outcomes: A case study from Turkey," IZA Journal of Labor Policy, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 10(1), pages 1-41, March.
    • Handle: RePEc:vrs:izajlp:v:10:y:2020:i:1:p:41:n:16
    DOI: 10.2478/izajolp-2020-0016
    as

    Download full text from publisher

    File URL: https://doi.org/10.2478/izajolp-2020-0016
    Download Restriction: no
    File URL: https://libkey.io/10.2478/izajolp-2020-0016?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Lawrence Katz & Alan Krueger, 1992. "The Effect of the Minimum Wage on the Fast Food Industry," Working Papers 678, Princeton University, Department of Economics, Industrial Relations Section..
    2. Aksu, Ege & Erzan, Refik & Kırdar, Murat Güray, 2022. "The impact of mass migration of Syrians on the Turkish labor market," Labour Economics, Elsevier, vol. 76(C).
    3. Sylvia Allegretto & Arindrajit Dube & Michael Reich & Ben Zipperer, 2017. "Credible Research Designs for Minimum Wage Studies," ILR Review, Cornell University, ILR School, vol. 70(3), pages 559-592, May.
    4. Margherita Comola & Luiz De Mello, 2011. "How Does Decentralized Minimum Wage Setting Affect Employment And Informality? The Case Of Indonesia," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 57, pages 79-99, May.
    5. Card, David & Krueger, Alan B, 1994. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania," American Economic Review, American Economic Association, vol. 84(4), pages 772-793, September.
    6. Sylvia A. Allegretto & Arindrajit Dube & Michael Reich, 2011. "Do Minimum Wages Really Reduce Teen Employment? Accounting for Heterogeneity and Selectivity in State Panel Data," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 50(2), pages 205-240, April.
    7. Charles Brown & Curtis Gilroy & Andrew Kohen, 1982. "The Effect of the Minimum Wage on Employment and Unemployment: A Survey," NBER Working Papers 0846, National Bureau of Economic Research, Inc.
    8. David Card, 1992. "Do Minimum Wages Reduce Employment? A Case Study of California, 1987–89," ILR Review, Cornell University, ILR School, vol. 46(1), pages 38-54, October.
    9. Melanie Khamis, 2013. "Does the minimum wage have a higher impact on the informal than on the formal labour market? Evidence from quasi-experiments," Applied Economics, Taylor & Francis Journals, vol. 45(4), pages 477-495, February.
    10. Caliendo, Marco & Fedorets, Alexandra & Preuss, Malte & Schröder, Carsten & Wittbrodt, Linda, 2018. "The short-run employment effects of the German minimum wage reform," Labour Economics, Elsevier, vol. 53(C), pages 46-62.
    11. Kerry L. Papps, 2012. "The Effects of Social Security Taxes and Minimum Wages on Employment: Evidence from Turkey," ILR Review, Cornell University, ILR School, vol. 65(3), pages 686-707, July.
    12. Lawrence F. Katz & Alan B. Krueger, 1992. "The Effect of the Minimum Wage on the Fast-Food Industry," ILR Review, Cornell University, ILR School, vol. 46(1), pages 6-21, October.
    13. Pedro S. Martins, 2021. "30,000 Minimum Wages: The Economic Effects of Collective Bargaining Extensions," British Journal of Industrial Relations, London School of Economics, vol. 59(2), pages 335-369, June.
    14. David Neumark, 2017. "The Employment Effects of Minimum Wages: Some Questions We Need to Answer," NBER Working Papers 23584, National Bureau of Economic Research, Inc.
    15. David Card, 1992. "Using Regional Variation in Wages to Measure the Effects of the Federal Minimum Wage," ILR Review, Cornell University, ILR School, vol. 46(1), pages 22-37, October.
    16. Brown, Charles & Gilroy, Curtis & Kohen, Andrew, 1982. "The Effect of the Minimum Wage on Employment and Unemployment," Journal of Economic Literature, American Economic Association, vol. 20(2), pages 487-528, June.
    17. Alexander Muravyev & Aleksey Oshchepkov, 2016. "The effect of doubling the minimum wage on employment: evidence from Russia," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-20, December.
    18. Doruk Cengiz & Arindrajit Dube & Attila Lindner & Ben Zipperer, 2019. "The Effect of Minimum Wages on Low-Wage Jobs," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 134(3), pages 1405-1454.
    19. Selin Pelek, 2015. "The Employment Effect of the Minimum Wage: An Empirical Analysis From Turkey," Ekonomi-tek - International Economics Journal, Turkish Economic Association, vol. 4(1), pages 49-68, January.
    20. Hugo Jales, 2018. "Estimating the effects of the minimum wage in a developing country: A density discontinuity design approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 33(1), pages 29-51, January.
    21. Lemos, Sara, 2009. "Minimum wage effects in a developing country," Labour Economics, Elsevier, vol. 16(2), pages 224-237, April.
    22. Meghan J. Millea & Jon P. Rezek & Brian Shoup & Joshua Pitts, 2017. "Minimum Wages in a Segmented Labor Market: Evidence from South Africa," Journal of Labor Research, Springer, vol. 38(3), pages 335-359, September.
    23. David Card, 1992. "Using Regional Variation in Wages to Measure the Effects of the Federal Minimum Wage," Working Papers 680, Princeton University, Department of Economics, Industrial Relations Section..
    24. Ham, Andrés, 2018. "The Consequences of Legal Minimum Wages in Honduras," World Development, Elsevier, vol. 102(C), pages 135-157.
    25. Hasan Tekgüç & Değer Eryar & Dilek Cindoğlu, 2017. "Women’s Tertiary Education Masks the Gender Wage Gap in Turkey," Journal of Labor Research, Springer, vol. 38(3), pages 360-386, September.
    26. Ximena V. del Carpio & Julián Messina & Anna Sanz‐de‐Galdeano, 2019. "Minimum Wage: Does it Improve Welfare in Thailand?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 65(2), pages 358-382, June.
    27. repec:fth:prinin:300 is not listed on IDEAS
    28. Dolton, Peter & Bondibene, Chiara Rosazza & Stops, Michael, 2015. "Identifying the employment effect of invoking and changing the minimum wage: A spatial analysis of the UK," Labour Economics, Elsevier, vol. 37(C), pages 54-76.
    29. Bossavie,Laurent Loic Yves & Acar,Aysenur & Makovec,Mattia, 2019. "Do Firms Exit the Formal Economy after a Minimum Wage Hike ?," Policy Research Working Paper Series 8749, The World Bank.
    30. Sinem Ayhan, 2013. "Do non-wage cost rigidities slow down employment? Evidence from Turkey," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-23, December.
    31. repec:fth:prinin:298 is not listed on IDEAS
    32. Uma RANI & Patrick BELSER & Martin OELZ & Setareh RANJBAR, 2013. "Minimum wage coverage and compliance in developing countries," International Labour Review, International Labour Organization, vol. 152(3-4), pages 381-410, December.
    33. Arindrajit Dube & T. William Lester & Michael Reich, 2010. "Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties," The Review of Economics and Statistics, MIT Press, vol. 92(4), pages 945-964, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. David Neumark & Peter Shirley, 2021. "Myth or Measurement: What Does the New Minimum Wage Research Say about Minimum Wages and Job Loss in the United States?," NBER Working Papers 28388, National Bureau of Economic Research, Inc.
    2. Haroon Bhorat & Tara Caetano & Benjamin Jourdan & Ravi Kanbur & Christopher Rooney & Benjamin Stanwix & Ingrid Woolard, 2016. "Investigating the Feasibility of a National Minimum Wage for South Africa," Working Papers 201601, University of Cape Town, Development Policy Research Unit.
    3. David Neumark, 2019. "The Econometrics and Economics of the Employment Effects of Minimum Wages: Getting from Known Unknowns to Known Knowns," German Economic Review, Verein für Socialpolitik, vol. 20(3), pages 293-329, August.
    4. Holmlund, Bertil, 2014. "What do labor market institutions do?," Labour Economics, Elsevier, vol. 30(C), pages 62-69.
    5. Sotomayor, Orlando J., 2021. "Can the minimum wage reduce poverty and inequality in the developing world? Evidence from Brazil," World Development, Elsevier, vol. 138(C).
    6. Marlies Piek & Dieter von Fintel, 2020. "Sectoral minimum wages in South Africa: Disemployment by firm size and trade exposure," Development Southern Africa, Taylor & Francis Journals, vol. 37(3), pages 462-482, May.
    7. Ham, Andrés, 2018. "The Consequences of Legal Minimum Wages in Honduras," World Development, Elsevier, vol. 102(C), pages 135-157.
    8. Young Cheol Jung & Adian McFarlane & Anupam Das, 2021. "The effect of minimum wages on consumption in Canada," The Economic and Labour Relations Review, , vol. 32(1), pages 65-89, March.
    9. Abdullah Selim Öztek, 2021. "Minimum Wage Effects under Informality: Evidence from Turkey," Bogazici Journal, Review of Social, Economic and Administrative Studies, Bogazici University, Department of Economics, vol. 35(2), pages 98-136.
    10. Robayo,Monica & Terskaya,Anastasia & Koettl-Brodmann,Stefanie, 2020. "Ex-ante Evaluation of the Impact of Increases in Minimum Wages on Labor Market Outcomes in Kosovo," Policy Research Working Paper Series 9357, The World Bank.
    11. Laporsek, Suzana & Orazem, Peter F. & Vodopivec, Matija & Vodopivec, Milan, 2019. "Long-Term Responses to Large Minimum Wage Shocks: Sub-Minimum and Super-Minimum Workers in Slovenia," IZA Discussion Papers 12123, Institute of Labor Economics (IZA).
    12. Zsófia L. Bárány, 2016. "The Minimum Wage and Inequality: The Effects of Education and Technology," Journal of Labor Economics, University of Chicago Press, vol. 34(1), pages 237-274.
    13. repec:hal:spmain:info:hdl:2441/4jgjdlef848r49dq2dv8go26r7 is not listed on IDEAS
    14. David Slichter, 2023. "The employment effects of the minimum wage: A selection ratio approach to measuring treatment effects," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 38(3), pages 334-357, April.
    15. Pérez Pérez, Jorge, 2020. "The minimum wage in formal and informal sectors: Evidence from an inflation shock," World Development, Elsevier, vol. 133(C).
    16. Zavodny, Madeline, 2000. "The effect of the minimum wage on employment and hours," Labour Economics, Elsevier, vol. 7(6), pages 729-750, November.
    17. repec:eee:labchp:v:3:y:1999:i:pb:p:2101-2163 is not listed on IDEAS
    18. Philipp Berge & Hanna Frings, 2020. "High-impact minimum wages and heterogeneous regions," Empirical Economics, Springer, vol. 59(2), pages 701-729, August.
    19. Bussolo, Maurizio & Mizala, Alejandra & Romaguera, Pilar, 2002. "Beyond Heckscher-Ohlin: trade and labour market interactions in a case study for Chile," Journal of Policy Modeling, Elsevier, vol. 24(7-8), pages 639-666, November.
    20. Mario Bossler & Hans-Dieter Gerner, 2020. "Employment Effects of the New German Minimum Wage: Evidence from Establishment-Level Microdata," ILR Review, Cornell University, ILR School, vol. 73(5), pages 1070-1094, October.
    21. Otterby, Dawn & Crawley, Andrew & Gabe, Todd, 2023. "Effects of the Minimum Wage on U.S. County Labor Markets," MPRA Paper 116162, University Library of Munich, Germany.
    22. Juan A. Correa & Francisco Parro, 2020. "On the heterogeneous short‐term effects of minimum wages on labor demand," International Journal of Economic Theory, The International Society for Economic Theory, vol. 16(2), pages 184-195, June.

    More about this item

    Keywords

    minimum wage; employment; informality; incremental difference-indifferences;
    All these keywords.

    JEL classification:

    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:vrs:izajlp:v:10:y:2020:i:1:p:41:n:16. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.sciendo.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.