Minimum Wages and Labour Supply in an Emerging Market: The Case of Mauritius

Abstract

Abstract This paper investigates the effect of multiple minimum wages, known as remuneration orders, on employment and working hours in Mauritius. Using data between 2005 and 2014, the analysis finds no effect on overall employment and different effects in sign for men and women. The minimum wage has a positive long-term effect on women's employment (0.141) and a negative effect on male employment (−0.097). The estimated employment elasticity magnitudes for men and women are within the range of elasticities found in previous studies of employment effects of minimum wages in low- and middle-income countries. The aggregate employment effect of the minimum wage in Mauritius is not significant, due to the larger share of men who are employed. The extensive margin effect of minimum wages is also associated with a 2.2% increase in average working hours for men but a 1.3% decline in average working hours for women in the covered sector. In the uncovered sector, the significant positive effect along the intensive margin, estimated at 4.6%, is driven by changes in labour supply among men.