Minimum Wages for Domestic Workers: Impact Evaluation of the Indian Experience

Posted: 8 Apr 2015 Last revised: 23 Nov 2020

See all articles by Rohan Gudibande

Rohan Gudibande

Woodrow Wilson School of International and Public Affairs, Princeton University

Arun Jacob

Graduate Institute of International and Development Studies (IHEID); United Nations - Conference on Trade and Development (UNCTAD)

Date Written: March 25, 2020

Abstract

What impact does minimum wage legislation have on wages and employment opportunities in an informal sector in a developing country? The paper answers this question in the context of minimum wage legislation for domestic workers in India over the period of 2004–2012. Combining, matching procedure with difference-in-difference estimation approach, supported by extensive robustness checks, the paper estimates both the short-run and the long-run impact of the legislation on real wages and employment. Results show a positive impact of the legislation on real wages in the short-run, while there is limited evidence of this effect persisting in the long-run. Further, the legislation did not seem to have any impact at the extensive margin on the probability of being employed as a domestic worker over short or long run. Our analysis further reveals that the wages of majority of workers remain below the minimum wage. Available evidence from the ground, in line with theoretical predictions, point towards weak enforcement of the legislation as the potential driving factor of observed results. As India recently extended national level minimum wage for all workers, the paper provides a cautionary tale on the potential pitfalls of implementation of this legislation in informal sector and suggests some ways to overcome the same.

Keywords: Minimum Wages; Informal Sector; Domestic Work; Employment; Wage Distributions; Decent Work

JEL Classification: J16; J31; J33; J38

Suggested Citation

Gudibande, Rohan and Jacob, Arun, Minimum Wages for Domestic Workers: Impact Evaluation of the Indian Experience (March 25, 2020). World Development, Forthcoming, Doi.org/10.1016/j.worlddev.2020.104943, Available at SSRN: https://ssrn.com/abstract=2591395 or http://dx.doi.org/10.2139/ssrn.2591395

Rohan Gudibande (Contact Author)

Woodrow Wilson School of International and Public Affairs, Princeton University ( email )

22 Chambers Street
Princeton, NJ 08544-0708
United States

Arun Jacob

Graduate Institute of International and Development Studies (IHEID) ( email )

PO Box 136
Geneva, CH-1211
Switzerland

United Nations - Conference on Trade and Development (UNCTAD) ( email )

Palais des Nations
Office E 8074
Geneva, 1211
Switzerland

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