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.