The effects of minimum wage on education acquisition in Brazil

Abstract

This article investigates the impact of the absolute and relative minimum wages on skill premiums and on-the-job education investments. It draws on administrative data on the Brazilian formal sector for 2006-13, exploring price level variations across states and time to identify the effects of the national minimum wage. Findings indicate that the absolute minimum wage reduces the skill premium and, on average, negatively affects educational acquisition, particularly at the bottom of the wage distribution. Conversely, the relative minimum wage increases the skill premium for top levels of education and, on average, has no significant effect on education investments, although there is some evidence for heterogeneous effects across the distribution.