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The impact of minimum wages on wages, work and poverty in Nicaragua

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  • Alaniz, Enrique
  • Gindling, T.H.
  • Terrell, Katherine

Abstract

In this paper we use an individual- and household-level panel data set to study the impact of changes in legal minimum wages on a host of labor market outcomes including: a) wages and employment, b) transitions of workers across jobs (in the covered and uncovered sectors) and employment status (unemployment and out of the labor force), and c) transitions into and out of poverty. We find that changes in the legal minimum wage affect only those workers whose initial wage (before the change in minimum wages) is close to the minimum. For example, increases in the legal minimum wage lead to significant increases in the wages and decreases in employment of private covered sector workers who have wages within 20% of the minimum wage before the change, but have no significant impact on wages in other parts of the distribution. The estimates from the employment transition equations suggest that the decrease in covered private sector employment is due to a combination of layoffs and reductions in hiring. Most workers who lose their jobs in the covered private sector as a result of higher legal minimum wages leave the labor force or go into unpaid family work; a smaller proportion find work in the public sector. We find no evidence that these workers become unemployed.

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  • Alaniz, Enrique & Gindling, T.H. & Terrell, Katherine, 2011. "The impact of minimum wages on wages, work and poverty in Nicaragua," Labour Economics, Elsevier, vol. 18(S1), pages 45-59.
    • Handle: RePEc:eee:labeco:v:18:y:2011:i:s1:p:s45-s59
    DOI: 10.1016/j.labeco.2011.06.010
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    More about this item

    Keywords

    Minimum wages; Employment; Poverty;
    All these keywords.

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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