Short Term Employment Transitions in Urban India: Role of Minimum Wages

This paper studies the minimum wage effect on the transitions of men and women workers from covered to uncovered sector as well as to unemployment and out of labour force. Using border discontinuity design, first differencing and the individual level panel data for the urban region for the years 2017-18 to 2022-23, and novel data on more than 1800 minimum wages, this paper finds that an increase in minimum wage results in transition of women workers out of the covered sector, however, for male workers this paper finds null employment transitions effects. The study on heterogenous effects reveal that the results are primarily driven by low-skilled female workers belonging to the regions of high labour market concentration where 10 percent increase in minimum wage result in a fall in probability that a worker remains in covered sector by 1.5 percent. Contrary to this, we find favorable labour market conditions for low-skilled male workers in the regions of high labour market concentration. The results are robust to various specification choices.