Work

The effects of monthly minimum wages on the labor market

Year: 2024

Type: article

Abstract: We explore the labor market impact of monthly minimum wages utilizing a model suitable for countries adopting monthly, weekly, or daily wage benchmarks. Our findings indicate that, in the absence of overtime regulations, an increase in monthly minimum wages will increase working hours and hourly wages and increase (or decrease) employment when the firm has high (or low) monopsony power. When incorporating overtime alongside its associated compensation, the implications of monthly minimum wages become contingent on the prevailing overtime premiums. We validate these assertions using microdata from China. • The monthly minimum wage affects the labor market differently than the hourly minimum wage. • A rise in monthly minimum wages can lead to longer working hours and higher hourly wages. • The employment impacts of monthly minimum wages vary with firms' monopsony power. • The enforcement of overtime pay regulations is crucial for determining the consequences of monthly minimum wages adjustments.

Source: China Economic Review

DOI: 10.1016/j.chieco.2024.102310

Authors: Zhengxiong Yang, Mingwei Liu, Shiwei Zhang, Chenxi Yin

Institutions: Nanjing University of Finance and Economics, Rutgers, The State University of New Jersey, Jilin University, South China University of Technology

Language: English

Topic: Labor market dynamics and wage inequality

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: hybrid

Estimated APC paid: $4,250