How Do Minimum Wage Policies Affect Workers in Emerging Markets?

Published on: 2015-04-16

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PARK, Albert
PARK, Albert, Director of HKUST IEMS, Chair Professor at HKUST’s Division of Social Science, and Professor of Economics, reviews the efficacy of minimum wage policies across BRICS countries–i.e. Brazil, Russia, India, China, and South Africa–highlighting their success or lackthereof as related to critical factors such as labor market coverage, policy enforcement, minimum wage level as compared to mean wages, and others.
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In this brief, the authors note that while minimum wage policies in BRICS countries generally increase wages at the bottom end of the wage distribution, their impact on employment and wealth inequality is less defined. The impact of such minimum wage policies closely tied to the levels of policy compliance and enforcement in each country. For example, in China, India, and South Africa–where enforcement is relatively high–minimum wages have had marked positive effects on labor markets (serving as a sort of “lighthouse effect”)–while in Russia and Brazil such regulations may have increased employment in informal labor markets.

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