The Effects of Multiple Minimum Wages Throughout the Labor Market

Thomas (Tim) Gindling and Katherine Terrell

No 1159, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper investigates the effects of legal minimum wages on wages, employment, hours worked and monthly earnings among workers covered by minimum wage legislation as well as those for whom it does not apply (the uncovered sector) in Costa Rica. This country’s large uncovered sector and complex minimum wage policy, which has for decades set numerous wages throughout the wage distribution, provide a stimulating counterpoint to the U.S. framework for the analysis of the impact of minimum wages. We find that legal minimum wages have a significant positive effect on the wages of workers in the covered sector (with an elasticity of 0.10) but no effect on wages of workers in the uncovered sector. We also find that a 10% increase in minimum wages lowers employment in the covered sector by 1.09% and decreases the average number of hours worked of those who remain in the covered sector by about 0.6%. Finally, we show that despite the wide range of minimum wages, the largest impact on the wages and employment of covered sector workers is in the lower half of the distribution.

Keywords: Costa Rica; employment; minimum wages; wages (search for similar items in EconPapers)
JEL-codes: J23 J31 J38 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2004-05
New Economics Papers: this item is included in nep-lab
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Citations: View citations in EconPapers (17)

Published - revised version published as 'The effects of multiple minimum wages throughout the labor market: The case of Costa Rica ' in: Labour Economics, 2007, 14 (3), 485-511

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Working Paper: The Effects of Multiple Minimum Wages Throughout the Labor Market (2004)
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