The effect of doubling the minimum wage on employment: evidence from Russia
Влияние удвоения минимальной заработной платы на занятость: данные по России
2016-03-29
SCID: 54.1/5dyz6ehj
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Abstract (AI)
We take advantage of a natural experiment in the minimum wage setting in Russia to study the employment consequences of large hikes in the minimum wage. In September 2007, the Russian government raised the federal minimum wage from 1100 to 2300 Rubles and simultaneously gave the regions the power to set their own minima above the federal threshold. In studying the effect of this reform, we follow the approach proposed by David Card and compare changes in employment rates and other labor market outcomes before and after the hike across regions with different shares of affected workers. We find some evidence of adverse effects of the 2007 hike in the minimum wage on employment. They are mostly visible in lower employment rates among the youth, as well as the increased informalization of employment. JEL codes: J38, J23
Key Findings
1
Negative employment effects were most apparent among young workers, who experienced lower employment rates after the reform.
2
Russia’s September 2007 reform more than doubled the federal minimum wage, from 1,100 to 2,300 rubles, while allowing regions to set higher minima.
3
The reform was associated with increased informalization of employment, suggesting some adjustment occurred outside formal employment.
4
Using regional differences in the shares of affected workers, the study finds evidence that the wage hike adversely affected employment.
Research Object
Russian regional labor markets affected by the 2007 federal minimum-wage increase and regional minimum-wage setting
Research Subject
The employment and labor-market effects of the large minimum-wage hike, especially youth employment and employment informalization
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2016-03-29
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