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The Effects of the Minimum Wage in the Private and Public Sectors in Brazil

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  • Sara lemos

Abstract

The wage and employment effects of the minimum wage predicted by the standard neoclassical theory rely on a profit maximizing firm, not on a Government employer that can cover the higher wage bill by raising taxes, reducing expenditure, or simply printing money. If the public sector has an inelastic labour demand, the associated non-negative employment effect might offset some of the negative employment effect observed in the private sector and the overall employment effect might be less adverse. This is particularly so if the public sector is overpopulated by minimum wage workers, as in Brazil. There is very limited evidence on the minimum wage effects in developing countries, and none whatsoever on the minimum wage effects across the private and public sectors. This paper estimates the effects of the minimum wage on wages and employment in both the private and public sectors. The data used is an under-explored monthly Brazilian household survey from 1982 to 2000 at individual and regional levels. Robust results suggest that the minimum wage compresses the distribution of both sectors, but in line with a stronger effect in the private sector, more adverse employment effects in the long run are also observed in that sector. In the public sector, no evidence of adverse employment effects was uncovered.

Suggested Citation

  • Sara lemos, 2004. "The Effects of the Minimum Wage in the Private and Public Sectors in Brazil," Discussion Papers in Economics 04/12, Division of Economics, School of Business, University of Leicester.
    • Handle: RePEc:lec:leecon:04/12
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    File URL: https://www.le.ac.uk/economics/research/RePEc/lec/leecon/dp04-12.pdf
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    References listed on IDEAS

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    1. Borjas, George J. & Freeman, Richard B. (ed.), 1992. "Immigration and the Work Force," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226066332.
    2. Alida Castillo-Freeman & Richard B. Freeman, 1992. "When the Minimum Wage Really Bites: The Effect of the U.S.-Level Minimum on Puerto Rico," NBER Chapters, in: Immigration and the Work Force: Economic Consequences for the United States and Source Areas, pages 177-212, National Bureau of Economic Research, Inc.
    3. George J. Borjas & Richard B. Freeman, 1992. "Immigration and the Work Force: Economic Consequences for the United States and Source Areas," NBER Books, National Bureau of Economic Research, Inc, number borj92-1, December.
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    Cited by:

    1. Richard B. Freeman, 2009. "Labor Regulations, Unions, and Social Protection in Developing Countries: Market distortions or Efficient Institutions?," NBER Working Papers 14789, National Bureau of Economic Research, Inc.
    2. Lemos Sara, 2005. "Political Variables as Instruments for the Minimum Wage," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 4(1), pages 1-31, December.
    3. Aleksandra Majchrowska & Paweł Strawiński, 2022. "Heterogeneous employment effects of minimum wage policies," Working Papers 2022-18, Faculty of Economic Sciences, University of Warsaw.
    4. Sara lemos, 2004. "The Effects of the Minimum Wage on Wages, Employment and Prices," Discussion Papers in Economics 04/10, Division of Economics, School of Business, University of Leicester.
    5. Oscar Iván Ávila-Montealegre & Anderson Grajales-Olarte & Juan J. Ospina-Tejeiro & Mario A. Ramos-Veloza, 2023. "Minimum Wage and Macroeconomic Adjustment: Insights from a Small Open, Emerging, Economy with Formal and Informal Labor," Borradores de Economia 1264, Banco de la Republica de Colombia.
    6. David Neumark & William Wascher, 2006. "Minimum Wages and Employment: A Review of Evidence from the New Minimum Wage Research," Working Papers 060708, University of California-Irvine, Department of Economics, revised Jan 2007.

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    JEL classification:

    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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