To Study the Impact on Occupation and Economical Status Due to Minimum Wages in India

Abstract

In this work, we examine the effects of changes in legal minimum wages on a range of labour market outcomes, such as: a) wages and employment; b) worker transitions between jobs (in the covered and uncovered sectors); c) employment status (unemployment and out of the labour force); and d) transitions into and out of poverty, using a panel data set at the individual and household levels. It has been observed that modifications to the legally mandated minimum wage solely impact employees whose pre-change starting pay was nearly at the minimum.For instance, raising the legal minimum wage has no appreciable effect on salaries in other sections of the distribution but causes a considerable increase in wages and a loss in employment of private sector workers who were previously paid within 20% of the minimum wage. According to the estimations derived from the employment transition equations, a combination of hiring freezes and layoffs is to blame for the decline in covered private sector employment. A lesser percentage of workers find employment in the public sector; the majority of workers who lose their jobs in the covered private sector due to higher legal minimum salaries either exit the labour force or take on unpaid family work. There is no proof that these workers lose their jobs, as we have found.

Our examination of the connection between household income and the minimum wage reveals that: Raising the legal minimum wage does two things: a) increase the chances that a low-income worker's family will be able to escape poverty; and b) if the increase affects the head of the household rather than the non-head, it is more likely to reduce the prevalence of poverty and make the transition from poverty to affluence easier. This is due to the fact that the head of the home has a lower probability of losing than the non-head, who is more likely to enter unpaid family work or retire from the workforce.