Publication: Can a Minimum Wage Increase Have an Adverse Impact on Inequality? Evidence from Two Latin American Economies
Abstract
This paper uses a semiparametric model to analyze the impact of an increase in the real minimum wage on inequality in Colombia between 1995 and 1999 and in Paraguay between 1993 and 2000-2001. Simulations suggest that if the employment effects of the minimum wage increase are ignored, the underlying policies would contribute to reduce earnings inequality in Colombia and would be inequality neutral in Paraguay. By considering the drop in wages of those who lost their jobs, simulations suggest that in both countries the policy in question would increase earnings inequality under some assumptions about the employment elasticity of the minimum wage and the new level of earnings unemployed workers rely upon. While these findings do not mean that minimum wage increases in LDCs (Less Developed Countries) necessarily have adverse distributional affects, they suggest that minimum wage policy should be implemented with care depending on how sensitive employment is to wage increases.
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Publication Can the Introduction of a Minimum Wage in FYR Macedonia Decrease the Gender Wage Gap?(2008-12)This paper relies on a simple framework to understand the gender wage gap in Macedonia, and simulates how the gender wage gap would behave after the introduction of a minimum wage. First, it presents a new - albeit simple - decomposition of the wage gap into three factors: (i) a wage level factor, which measures the extent to which the gender gap is driven by differences in wage levels among low-skilled workers of opposite sex; (ii) a skills endowment factor, which quantifies the extent to which the gender wage gap is driven by the difference in the share of high-skilled workers by gender; and (iii) returns to education, which measures the extent to which the gender gap is driven by differences by gender in returns to education. 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This evidence suggests that countries that have flexible labor markets and experience volatility in their external demand might also experience volatility in returns to schooling. The paper discusses why this might be a concern for developing countries.Publication Building Effective Employment Programs for Unemployed Youth in the Middle East and North Africa(Washington, DC: World Bank, 2013)This study surveys active labor market programs (ALMPs) in selected countries of the Middle East and North Africa (MENA) region, identifies key challenges to their effective and efficient delivery, and proposes a policy framework for reforming public service provision. This study draws on data collected through surveys administered to public social, employment, and education agencies in selected MENA countries to identify key constraints and options for reforming publicly provided employment programs. Recent political transitions arising from the Arab Spring have contributed to the deterioration of labor market outcomes in the MENA region. In this context, ALMPs could become an important policy lever to address some of the challenges facing labor markets. These include: joblessness, skills mismatches, lack of labor market mobility, large and expanding informal sector, and lack of formal employment networks. The study also provides specific details on the beneficiaries, targeting, and expenditures of ALMPs during this same period.Publication Are Minimum Wages and Payroll Taxes a Constraint to the Creation of Formal Jobs in Morocco?(World Bank, Washington, DC, 2016-08)This paper uses a search-and-matching model to examine the effects of labor regulations that influence the cost of formal labor (notably minimum wages and payroll taxes) on labor market outcomes in Morocco. The model assumes that the informal sector is unregulated and thus not directly affected by these labor policies. However, the model takes into consideration that although labor policies apply only to the formal sector, they may influence the size and the composition of employment in the informal sector, as well as the size and composition of unemployment and self-employment. The results indicate that these regulations, especially minimum wage policy, contribute to higher unemployment rates and constraint formalization in Morocco, especially for youth and women.Publication Labor Markets and School-to-Work Transition in Egypt : Diagnostics, Constraints, and Policy Framework(World Bank, Washington, DC, 2010-11)Analysis in this policy note indicates a rapid deterioration in employment opportunities for young individuals transitioning from school to work in Egypt. Despite substantial improvements in labor market outcomes in recent years (in raising employment and participation and in lowering unemployment), unemployment rates in Egypt remain exceedingly high among youth entering the labor market for the first time. A slow school-to-work transition remains the main reason behind high unemployment rates. Young entrants to the labor market have become more educated than ever before: the share of the working-age-population with university education in Egypt has increased significantly between the years 1998 and 2006 (from 14% to 19% among men and from 9% to 14% among women). However, youth are unable to capitalize the time and resources invested in their education as the labor market is not providing enough good-quality jobs for them. To cope with scarce formal jobs, young-educated workers are opting to work in the informal sector and/or withdraw from the labor force, which is contributing to a deadweight loss of recent investments in education. 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