Abstract
This paper investigates the effect of multiple minimum wages, known as remuneration orders, on employment and working hours in Mauritius. Using data between 2004 and 2014, the analysis indicates that a 10 percent increase in the minimum wages brings about a slightly positive effect on employment in the covered sector, with an estimated employment elasticity of 0.113, which is within the range of elasticities found in previous studies of employment effects of minimum wages in low- and middle-income countries. The positive employment effect of minimum wages is also associated with a 2.3 percent increase in average working hours for men but a 1.8 percent decline in average working hours for women in the covered sector. In the uncovered sector, the significant positive effect along the intensive margin, estimated at 4.2 percent, is driven by changes in labor supply among men.
Highlights
Minimum wage systems exist in about 90 percent of the International Labour Organization’s (ILO) 193 member states (Benassi, 2011)
We find that the positive employment effect of minimum wages in Mauritius is associated with a 2.3 percent increase in average working hours for men but a 1.8 percent decline in average working hours for women in the covered sector, for a 10 percent increase in the minimum wage
We have considered the effects of minimum wages on employment and hours worked in Mauritius
Summary
Minimum wage systems exist in about 90 percent of the International Labour Organization’s (ILO) 193 member states (Benassi, 2011). Using data between 2004 and 2014, we find that a 10 percent increase in the minimum wages brings about a slightly positive effect on employment in the covered sector, with an estimated employment elasticity of 0.113 This is within the range of elasticities found in previous studies of employment effects of minimum wages in LMI countries. The results suggest the presence of monopsony power in the low-wage labor market in Mauritius with increases in minimum wages being associated with a slightly positive effect on employment in the covered sectors. It seems that increases in the minimum wage have the effect of increasing average work hours for males in both the covered and uncovered sectors. We briefly note the limitations of our study and take note of minimum wage compliance which may affect our estimation of effects
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