Minimum wage effects on informality across demographic groups in Colombia

Serie

• Documento de trabajo RIEC

Resumen

• We present evidence of the minimum wage effects on labour informality rates in Colombia. Our identification strategy consists of dividing the working population into sixteen groups depending on their age, gender and educational level to observe how the variations in the minimum wage with respect to the 70th percentile of the distribution of salaries corresponding to the demographic group of each individual, affects the probability of having an informal occupation. The results suggest that the higher the value of the minimum wage ratio the higher will be the probability of being informal. An increase of one percentage point (pp) in the ratio of the minimum wage increases the probability of having an informal job by 0.21 pp. This effect may be greater in cities with higher informality rates and consequently with lower labour productivity of less educated workers. Our results also present evidence of non-linear effects, which suggests that workers whose labour productivity is less than the minimum wage are more likely to have informal jobs.
• We present evidence of the minimum wage effects on labour informality rates in Colombia. Ouridentification strategy consists of dividing the working population into sixteen groups depending on theirage, gender and educational level to observe how the variations in the minimum wage with respect to the70th percentile of the distribution of salaries corresponding to the demographic group of each individual,affects the probability of having an informal occupation. The results suggest that the higher the value ofthe minimum wage ratio the higher will be the probability of being informal. An increase of one percentagepoint (pp) in the ratio of the minimum wage increases the probability of having an informal job by 0.21 pp.This effect may be greater in cities with higher informality rates and consequently with lower labourproductivity of less educated workers. Our results also present evidence of non-linear effects, whichsuggests that workers whose labour productivity is less than the minimum wage are more likely to haveinformal jobs.

Grupo Temático

• Informalidad  Group

autores

• Arango Thomas, Luis Eduardo
• Flórez, Luz Adriana
• Guerrero, Laura D.

fecha de publicación

• 2021

Área temática

• J21 - Mano de obra y empleo: dimensión y estructura
• J30 - Salarios, remuneraciones y costes laborales: Generalidades
• J46 - Mercados de trabajo informales
• O17 - Sector formal e informal; Economía sumergida; Acuerdos institucionales

Enfoque geográfico

• Colombia  Country
• South America  Continent

Líneas de investigación

• Heterogeneity
• Labour informality
• Minimum wage
• heterogeneity
• labour informality
• minimum wage

Issue

• 81