Employment Effects of Minimum Wages in Inflexible Labor Markets

29 Pages Posted: 26 Mar 2008

See all articles by Orgul D. Ozturk

Orgul D. Ozturk

University of South Carolina - Moore School of Business - Department of Economics

Date Written: 2007

Abstract

This paper structurally models and estimates the employment effects of minimum wages in inflexible labor markets with fixed employment costs. When there are fixed costs associated with employment, minimum wage regulation not only results in a reduction in employment among low productivity workers but also shifts the distribution of hours for the available jobs in the market, resulting in scarcity of part-time jobs. Thus, for sufficiently high employment costs, a minimum wage makes it less likely for marginal workers to enter and stay in the labor market and has important employment effects. I estimate the model using survey data from Turkey. I find significant reduction in employment due to the loss of part time jobs caused by the national minimum wage policy in this highly inflexible labor market.

Keywords: Fixed employment costs, labor market inflexibility, minimum wage, female labor force participation

JEL Classification: J2,J3, E2

Suggested Citation

Ozturk, Orgul D., Employment Effects of Minimum Wages in Inflexible Labor Markets (2007). Available at SSRN: https://ssrn.com/abstract=1113175 or http://dx.doi.org/10.2139/ssrn.1113175

Orgul D. Ozturk (Contact Author)

University of South Carolina - Moore School of Business - Department of Economics ( email )

The Francis M. Hipp Building
1705 College Street
Columbia, SC 29208
United States

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