Minimum Wages and the Welfare of Workers in Honduras
Taking advantage of a complex minimum wage structure in Honduras, this paper examines how changes in minimum wages over the 1990-2004 period affect unemployment as well as the employment and average wages of workers in different sectors of the economy: medium and large-scale firms v. small firms in the private sector (where minimum wage legislation applies) and civil servants and self-employed workers (where it does not apply). The evidence suggests that minimum wages are effectively enforced only in medium and large-scale firms, where a 1% increase in the minimum wage leads to an increase of 0.29% in the average wage and a reduction in employment of -0.46%. We find that increases in the private sector minimum wage are emulated in public sector wages, but there are no disemployment effects there. There is some evidence that a higher minimum wage may increase unemployment. There are no discernable effects of minimum wages on the wages of workers in small-firms or the self-employed. The positive impact of higher minimum wages on average wages is greatest for the primary educated in large private firms; but this group also suffers a very large disemployment effect. We conclude that, even in the sector where minimum wages are enforced and even under our upper bound estimate of the effect on the wages of workers, the welfare – the total earnings – of low-paid workers in the large-firm covered sector falls with higher minimum wages.
|Date of creation:||Jun 2007|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org
|Order Information:|| Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- James Heckman & Carmen Pages, 2003.
"Law and Employment: Lessons from Latin America and the Caribbean,"
NBER Working Papers
10129, National Bureau of Economic Research, Inc.
- James J. Heckman & Carmen Pagés, 2004. "Law and Employment: Lessons from Latin America and the Caribbean," NBER Books, National Bureau of Economic Research, Inc, number heck04-1, Abril.
- Kristensen, Nicolai & Cunningham, Wendy, 2006. "Do minimum wages in Latin America and the Caribbean matter ? Evidence from 19 countries," Policy Research Working Paper Series 3870, The World Bank.
- Brown, Charles, 1999. "Minimum wages, employment, and the distribution of income," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 32, pages 2101-2163 Elsevier.
- Arellano, Manuel & Bond, Stephen, 1991.
"Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations,"
Review of Economic Studies,
Wiley Blackwell, vol. 58(2), pages 277-97, April.
- Tom Doan, . "RATS program to replicate Arellano-Bond 1991 dynamic panel," Statistical Software Components RTZ00169, Boston College Department of Economics.
- Maloney, William F. & Nunez, Jairo & Cunningham, Wendy & Fiess, Norbert & Montenegro, Claudio & Murrugarra, Edmundo & Santamaria,Mauricio & Sepulveda, Claudia, 2001.
"Measuring the impact of minimum wages : evidence from Latin America,"
Policy Research Working Paper Series
2597, The World Bank.
- William Maloney & Jairo Mendez, 2004. "Measuring the Impact of Minimum Wages. Evidence from Latin America," NBER Chapters, in: Law and Employment: Lessons from Latin America and the Caribbean, pages 109-130 National Bureau of Economic Research, Inc.
- William F. Maloney & Jairo Nunez Mendez, 2003. "Measuring the Impact of Minimum Wages: Evidence from Latin America," NBER Working Papers 9800, National Bureau of Economic Research, Inc.
- Mariano Bosch, 2006.
"Job Creation and Job Destruction in the Presence of Informal Labour Markets,"
CEP Discussion Papers
dp0761, Centre for Economic Performance, LSE.
- Mariano Bosch, 2006. "Job creation and job destruction in the presence of informal labour markets," LSE Research Online Documents on Economics 19785, London School of Economics and Political Science, LSE Library.
- Saint-Paul, Gilles, 1994.
"Searching for the Virtues of the European Model,"
CEPR Discussion Papers
950, C.E.P.R. Discussion Papers.
- Richard Blundell & Stephen Bond, 2000.
"GMM Estimation with persistent panel data: an application to production functions,"
Taylor & Francis Journals, vol. 19(3), pages 321-340.
- Richard Blundell & Steve Bond, 1999. "GMM estimation with persistent panel data: an application to production functions," IFS Working Papers W99/04, Institute for Fiscal Studies.
- Gilles Saint-Paul, 1994. "Do Labor Market Rigidities Fulfill Distributive Objectives?: Searching for the Virtues of the European Model," IMF Staff Papers, Palgrave Macmillan, vol. 41(4), pages 624-642, December.
- Rama, Martin, 2003.
"Globalization and workers in developing countries,"
Policy Research Working Paper Series
2958, The World Bank.
- Freeman, Richard B, 1996. "The Minimum Wage as a Redistributive Tool," Economic Journal, Royal Economic Society, vol. 106(436), pages 639-49, May.
When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp2892. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak)
If references are entirely missing, you can add them using this form.