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Minimum Wages and Unemployment during Economic Shocks

Author

Listed:
  • Merfeld, Joshua D.

    (KDI School of Public Policy and Management)

  • Sharp, Matthew

    (University of Oxford)

Abstract

This paper studies whether a minimum wage changes how labour markets respond to economic shocks. Using data from South Africa, we show that an agricultural minimum wage leads to higher mean wages with no significant impacts on mean employment. However, these positive aggregate outcomes hide important heterogeneity: the imposition of the minimumwage leads to substantial declines in employment - especially overall hours - in the sector in the wake of negative weather-related economic shocks, which typically exert downward pressure on wages. The increased variance of employment across years in the post-law period suggests caution in interpreting the overall welfare impacts of minimum wage laws.

Suggested Citation

  • Merfeld, Joshua D. & Sharp, Matthew, 2023. "Minimum Wages and Unemployment during Economic Shocks," IZA Discussion Papers 16507, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp16507
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    More about this item

    Keywords

    minimum wage; agriculture; shocks; weather; South Africa;
    All these keywords.

    JEL classification:

    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J43 - Labor and Demographic Economics - - Particular Labor Markets - - - Agricultural Labor Markets
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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