Employment Effects of Minimum Wages in Inflexible Labor Markets

Ozturk, Orgul (2006): Employment Effects of Minimum Wages in Inflexible Labor Markets.

Abstract

This paper structurally models and estimates the employment effects of a minimum wage regulation in an inflexible labor market with fixed employment costs. When there are fixed costs associated with employment, minimum-wage regulation not only results in a reduction in employment among low-productivity workers but also shifts the distribution of hours for the available jobs in the market, resulting in a scarcity of part-time jobs. Thus, for sufficiently high employment costs, a minimum wage makes it less likely for "marginal" workers to enter and stay in the labor market. I estimate the model using survey data from Turkey. I find a significant reduction in employment due to the loss of part-time jobs caused by the national minimum-wage policy in this highly inflexible labor market.

• Item Type: MPRA Paper
• Language: English
• Keywords: Fixed employment costs, labor market inflexibility, minimum wage, female labor force participation, part-time jobs, hours constraints
• Subjects: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor

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