By Hang Anh Nguyen, Martin O’Brien & Alfredo Paloyo

Minimum wage policies have become a nearly universal feature of modern labour markets, with over 90% of countries implementing statutory wage floors since 2012 (Del Carpio & Pabon, 2014). Yet, despite their widespread adoption, the economic effects of minimum wages remain highly contested. Advocates argue that they boost earnings for lowwage workers, reduce income inequality, and mitigate poverty, while critics contend that they suppress productivity, distort wage structures, and incentivise firms to circumvent regulations through informal employment. At the core of this debate is a fundamental tension between market efficiency and equity—whether minimum wages improve worker welfare without imposing excessive distortions on firms. Classical economic models predict that binding minimum wages lead to job losses, particularly for low-skilled workers, whereas alternative frameworks, such as monopsony models, suggest that they can raise both wages and employment. The growing body of empirical research has yet to yield a consensus, as the impact of minimum wage policies appears to be highly context-dependent, shaped by institutional settings, labour market frictions, and compliance dynamics. This paper contributes to this ongoing debate by examining a crucial but understudied dimension: the gendered effects of minimum wage policies in an economy with a large informal sector.

Source SSRN