The Effects of Multiple Minimum Wages Throughout the Labor Market

44 Pages Posted: 1 Jun 2004

See all articles by T. H. Gindling

T. H. Gindling

University of Maryland, Baltimore County; IZA Institute of Labor Economics

Katherine Terrell

Stephen M. Ross School of Business at the University of Michigan; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics; Gerald R. Ford School of Public Policy

Date Written: May 2004

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: minimum wages, employment, wages, Costa Rica

JEL Classification: J23, J31, J38

Suggested Citation

Gindling, Thomas and Terrell, Katherine, The Effects of Multiple Minimum Wages Throughout the Labor Market (May 2004). Available at SSRN: https://ssrn.com/abstract=554044

Thomas Gindling

University of Maryland, Baltimore County ( email )

1000 Hilltop Circle
Baltimore, MD 21250
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Katherine Terrell (Contact Author)

Stephen M. Ross School of Business at the University of Michigan ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Gerald R. Ford School of Public Policy ( email )

735 South State Street, Weill Hall
Ann Arbor, MI 48109
United States

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