Skip to main content
Article thumbnail
Location of Repository

Minimum Wage Effects on Wages, Employment and Prices: Implications for Poverty Alleviation in Brazil

By Sara Lemos


This paper presents new evidence on the effects of the minimum wage using Brazilian monthly household and firm panel data between 1982 and 2000. By examining the effects on wages, employment and prices together we are able to provide an explanation for the small employment effects prevalent in the literature. Our principal finding is that increasing the minimum wage raises wages and prices with small adverse employment effects. This suggests a general wage-price inflationary spiral, where persistent inflation offsets some of the wage gains. The main policy implication deriving from these results is that the potential of the minimum wage to help the poor is bigger under low inflation. Under high inflation, the resulting wage-price spiral makes the minimum wage increase — as well as its antipoverty policy potential — short lived. In this case, the wage effects are volatile and the permanent scars are lower employment and higher inflation in Brazil

Topics: minimum wages, labor costs, employment, Brazil, cost shock
Publisher: Dept. of Economics, University of Leicester
Year: 2005
OAI identifier:

Suggested articles


  1. (2004b): “Minimum Wage Policy and Employment Effects: Evidence from Brazil”, doi
  2. (2004c): “Are Wage and Employment Effects Robust to Alternative Minimum Wage Variables?”,
  3. (2004d): “Political Variables as Instruments for the Minimum Wage”, doi
  4. (2003). Conditional Cash Transfers, Schooling, and Child Labor: Micro-Simulating Brazil’s Bolsa Escola Program”, The World Bank Economic Review, doi
  5. (1981). Effects of Minimum Wage Policy on Inflation and on Output, Prices, Employment and Real Wage Rates by Industry,"
  6. (1997). Goods Prices and Exchange Rates: What Have We Learned?," doi
  7. (1981). Impact of MinimumWage Legislation on Wage and Price Inflation,"
  8. (1976). Impact of MinimumWages on Other Wages, Employment, and Family Incomes," doi
  9. LANJOUW (2004): “Small-Scale Industry, Environmental Regulation, and Poverty: The Case of Brazil”, The World Bank Economic Review, doi
  10. (2001). Minimum Wage Effects Throughout the Wage Distribution: Evidence from Brazil’s Formal and Informal Sectors," Anais do XXIX Encontro Nacional de Economia. doi
  11. (1999). MinimumWages, Employment, and the Distribution of Income,"
  12. (1995). Myth and Measurement: The New Economics of the Minimum Wage. doi
  13. (2001). Price Pass-through and the Minimum Wage," doi
  14. (1996). Retail Price Reactions to Changes in State and Local Sales Taxes,"
  15. (2005). The Distributional Effects of Minimum Wages in Brazil: 1996-2001," forthcoming
  16. (1996). The Economic Impact of Minimum Wages in Europe," Economic Policy: doi
  17. (1999). The Effects of Minimum Wages on Employment: Theory and Evidence from Britain," doi
  18. (1996). The Minimum Wage as a Redistributive Tool," doi
  19. (2005). The Minimum Wage Effects throughout the Wage Distribution”, doi
  20. (2004). Trade Policy and Poverty Reduction in Brazil”, The World Bank Economic Review, doi
  21. (2002). Uma Resenha Empirica Sobre Os Efeitos Do Salario Minimo No Mercado De Trabalho Brasileiro," The Jobs Report, The World Bank, doi
  22. (2001). Winners and Losers of Federal and State Minimum Wages," Employment Policies Institute Foundation Paper,

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.