Research on the minimum wage is typically difficult as it is often hard to disentangle
"genuine" minimum wage effects from statistical artefacts. In this study, the problem is even
more acute because of the lack variability in the evolution of the minimum wages between
provinces prior to 2001. Moreover, the evolution of the minimum wages compared to the
GDP during the last decade makes it even more difficult as the minimum wage increased at a
slower rate than the output of the Thai economy. Thus, providing any elasticity values of
employment with respect to minimum wages variation would be somewhat daring. However,
our empirical investigation still provides some insights on the relationship between minimum
wages and employment in Thailand.
First, our analysis seems to indicate that minimum wages have an impact on the wage
distribution. This is particularly true in the manufacturing sector, where about 30% of the
workers paid on the daily basis earn exactly the minimum wage. However, minimum wage
occurrences are much lower in the rest of the economy, which seems to indicate that most of
the workers are not actually covered by the minimum wages.
Our statistical analysis suggests that minimum wages produce no effects outside the formal
sector. When we investigate the impact of minimum wages on total employment, whether
formal or not, the minimum wage coefficients are mostly positive. This would indicate a
positive impact of minimum wages on employment. This effect is likely due to the positive
relationship between minimum wage and informal employment. Indeed, we find that higher
minimum wages are correlated with higher level of informal employment. This effect is
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mainly observed during period including the 1997-98 crisis. Thus, it is difficult to conclude
whether the estimated correlation is a genuine minimum wage effect or whether it is a
consequence of the crisis that was statistically picked up by our minimum wage variable.
When we focus on types of employment more susceptible to be affected by minimum wage
changes, such as formal or manufacturing employment, the results are somewhat altered.
Indeed, we find weak evidence of negative employment effect in manufacturing and in the
formal sector. However, the estimated elasticity values remain quite small.
Finally, we attempt to measure the impact of minimum wages on unemployment. Statistically,
unemployment has been traditionally low in Thailand, but it increased sharply during the
economic crisis. Because of the implementation of a new unemployment insurance scheme,
studying the link between minimum wages and unemployment is of primary importance. Our
results point to a positive impact of the minimum wages on unemployment, which means that
raising minimum wages may lead to greater unemployment.
Because of the feature of the minimum wage in Thailand and the data at disposal, estimating
the minimum wage is a difficult exercise. In this study, we find no compelling evidence of
any impact of the minimum wages on employment. While we found some weak evidence in
line with the neoclassical model, the estimated impacts are quite small. Thus, a reasonable
increase in the minimum wages in Thailand is unlikely to produce large employment effects.
Moreover, one can not blame the minimum wage for any employment downturn experienced
by the Thai economy in recent years.
The primary goal of the minimum wage is to increase the living standard of the population.
Whether the minimum wage law in Thailand achieves this goal is a topic well beyond the
scope of the present study. Indeed, minimum wages produce also impacts on individuals that
do not belong to the covered sector. However, the small minimum wage impacts found in the
present study makes it unlikely that minimum wages alter significantly the well-being of the
poorest. However, it should be reminded that in the long-term, the well-being of workers
depend more on their productivity than on the level of the minimum wages. One can not rule
out that in the long term higher minimum wages may create incentives to increase the
productivity of the low-paid.