How does minimum wage affect employment? Evidence from selected African countries
by Mawussé Komlagan Nézan Okey; Madeleine Dopé Adjor; Yawo Elinam Ketor
International Journal of Economics and Accounting (IJEA), Vol. 9, No. 2, 2020

Abstract: How minimum wage legislation affects employment dynamics in Africa? This article examines the relationship between the minimum wage and the employment in selected African countries over the period 1990–2015 using fixed effects estimation and dynamic panel data for selected African countries. Beside the analysis of the effect of minimum wage, the paper also evaluates the determinants of employment in Africa. The results show a negative relationship between minimum wage and employment confirming the neoclassic view that as the price of labour increases, employers will demand less labour. In addition, the previous employment rate has a positive effect on the current employment. Estimates also show that the level of income and education positively affect employment rates. Furthermore, the results show that low level of democracy negatively impacts the employment rates. The effect of minimum wage on employment will help policymakers to correct the labour market imperfections through the manipulation of minimum wages and provide a living wage for the poorest quintile of workers.

Online publication date: Fri, 14-Feb-2020

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