"Varieties of minimum wage system" through the dubious lens of indicator-based rankings

Abstract

Growing interest in the impact of labour regulations on labour market performance has prompted attempts to quantify labour standards for cross-country comparison. While recognizing the contribution of such quantification to empirical research, this article takes issue with indicators that purport to rank countries' regulatory regimes. With reference to the minimum wage component of the World Bank's Doing Business indicators, the author identifies major limitations of this device - theoretical bias, measurement error, disregard of institutional particulars and failure to account for regulatory indeterminacy. His examination of minimum wage systems concludes with an argument against the grounding of policy decisions on indicator-based rankings. 2012 © International Labour Organization 2012.