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The effect of minimum wage hike on informality is concentrated on low-wage sectors

Seyfettin Gürsel, Ozan Bakış and Yazgı Genç 

Executive Summary

In the research note we published earlier (see Betam Research Note 18/220, “Minimum wage negatively effects informal employment”), the effect of the increase in minimum wage on informal employment was analysed for both wage and non-wage earners (employer, own account worker and free family worker). We observed that effect of minimum wage increase is positive especially for non-wage earners.

In this research note, we are examining the effect of minimum wage on informal employment at the sector level by using the most up-to-date data. The preliminary results show that the minimum wage increase in 2016 affects the informal employment both in 2016 and 2017. However, there is a difference between the effects in 2016 and 2017. While the effect of informality is more concentrated in the low-wage sectors (sectors where workers earning minimum wage or below) in 2016, in the period of 2017 the effect, while still there, is likely to be independent of sector.

doc. ResearchBrief222

pdf. ResearchBrief222