Minimum Wages and Unemployment during Economic Shocks

Joshua D. Merfeld () and Matthew Sharp ()
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Joshua D. Merfeld: KDI School of Public Policy and Management
Matthew Sharp: University of Oxford

No 16507, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper studies whether a minimum wage changes how labour markets respond to economic shocks. Using data from South Africa, we show that an agricultural minimum wage leads to higher mean wages with no significant impacts on mean employment. However, these positive aggregate outcomes hide important heterogeneity: the imposition of the minimumwage leads to substantial declines in employment - especially overall hours - in the sector in the wake of negative weather-related economic shocks, which typically exert downward pressure on wages. The increased variance of employment across years in the post-law period suggests caution in interpreting the overall welfare impacts of minimum wage laws.

Keywords: minimum wage; agriculture; shocks; weather; South Africa (search for similar items in EconPapers)
JEL-codes: J38 J43 O12 O13 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2023-10
New Economics Papers: this item is included in nep-lma
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