The Impact of Minimum Wages on Employment: Evidence From a Lower Middle-Income Country

Abstract

In this study, we examine the impact of minimum wages in Vietnam using individual-level data from the annual Labor Force Surveys (2012–20). During this period, the average real minimum wage increased by around 4% per year. Overall, we do not find significant effects from minimum wages on employment and monthly wage earnings. However, we find a considerable negative effect on workers' total working hours. Working hours per week are reduced by 0.38% for a 1% increase in the minimum wage. Since total wages remain unchanged, a reduction in working hours results in an increase in hourly earnings. A 1% increase in the minimum wage leads to a 0.32% increase in hourly earnings.