Do Minimum Wages Increase Female Employment? Evidence from Vietnamese Manufacturing Firms

ABSTRACT

In this article, I empirically examine the employment effect of minimum wages using firm-level data on Vietnamese manufacturing and find that minimum wages have a positive association with a firm’s female employment. This effect is the highest in automotive and engineering manufactures, and the lowest in textile, garment, and footwear manufactures. Alternative regressions provide evidence that the higher the total factor productivity, the increased female labor share, and the higher pay to their employees, the stronger the female employment effect. The female employment impact is positive, but this impact weakened after the uniform minimum wage rate was applied in 2012.

KEYWORDS:

• Minimum wages
• female employment
• Vietnam

Acknowledgments

I gratefully acknowledge the valuable comments from Craig R. Parsons. I am also grateful for the excellent comments from the anonymous referees on earlier versions. The usual disclaimer applies.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

¹ Total factor productivity (TFP) is estimated following the IV-GMM modified Levinsohn-Petrin procedure proposed in Wooldridge (2009).

² This method is proposed in a seminal study by Berman, Martin, and Mayer (2012).

³ For more details on the minimum wage, see the government’s decrees number 103/2014/NĐ-CP; 182/2013/NĐ-CP; 103/2012/NĐ-CP; 70/2011/NĐ-CP; 107/2010/NĐ-CP; 108/2010/NĐ-CP; 98/2009/NĐ-CP; and 97/2009/NĐ-CP.

⁴ The Lall classification consists of three categories: low technology industry (textile, garment, and footwear manufactures), medium technology industry (automotive and engineering manufactures), and high technology industry (electronic and electrical manufactures). In this article, I use a concordance table to match the Vietnamese industry classifications with the Lall classification and include only these matched classifications in the regressions.

⁵ A more appropriate measure should be the proportion of employees whose monthly wage was below the newly introduced minimum wage (Dube, Naidu, and Reich 2007). However, I cannot use this measure because there are no data on the wages of individual workers.

⁶ For more details, see Betcherman (2015).

Additional information

Funding

This work was funded by the NationalFoundation for Science and Technology Development(NAFOSTED), Vietnam [502.99-2017.04].