By: David Margolis (CES – Centre d’économie de la Sorbonne – UP1 – Université Panthéon-Sorbonne – CNRS, EEP-PSE – Ecole d’Économie de Paris – Paris School of Economics, IZA – Institute for the Study of Labor, IZA – Forschungsinstitut zur Zukunft der Arbeit (Institute for the Study of Labor) – Bonn Universität – University of Bonn)
The motivation for introducing statutory minimum wages in many developing countries is often threefold: poverty-reduction, social justice and growth. How well the policy succeeds in attaining these goals will depend on the national context and the numerous choices made when designing the policy. Institutional capacity in developing countries tends to be limited, so institutional arrangements must be adapted. Nevertheless, a statutory minimum wage appears to have the potential to help low- and middle-income countries advance toward the aforementioned development objectives, even in the face of weak enforcement capacity and pervasive informality.