How Should We Rethink Minimum Wage for Sustainable Labor Markets? A Sectoral-Structural Framework for Developing Economies
DOI:
https://doi.org/10.51137/wrp.ijsbe.489Keywords:
Minimum Wage, Labor Policy, Sustainability, Developing Economy, Inclusive Growth, Progressive Wage ModelAbstract
Minimum wage policies remain a pivotal tool for labor market regulation, yet their effectiveness varies across developing economies due to structural heterogeneity and institutional differences. This conceptual paper employs a systematic literature review following the PRISMA framework to examine global minimum wage models, historical evolution, and their implications for sustainable labor markets. Using databases including Scopus, Web of Science, and Google Scholar, 87 relevant studies were selected and analyzed based on country context, policy type, and temporal trends. The findings highlight the evolution of minimum wage frameworks from early national legislation in industrialized nations to contemporary approaches such as multi-tier systems, regional differentiation, and the Progressive Wage Model in developing countries. Comparative analysis reveals that while national wage floors enhance equity, sector-specific models and skills-linked frameworks better address informal labor, underemployment, and economic sustainability. Minimum wage levels across selected developing economies (Malaysia, Indonesia, India, Vietnam, and others) demonstrate rising trends aligned with social equity objectives, yet disparities persist due to income classifications, regional cost-of-living differences, and labor market segmentation. This paper argues for a hybrid minimum wage policy that integrates competitive and monopsonistic labor market insights, linking wage floors with productivity, vocational training, and institutional capacity building. Such a framework not only improves wage adequacy but also promotes sustainable employment, social inclusion, and long-term economic resilience. The study provides policymakers and researchers with a structured conceptual basis for designing context-sensitive and sustainable minimum wage policies in developing economies.
References
Akgündüz, Y. E., Aldan, A., Bağır, Y. K., & Torun, H. (2019). Impact of minimum wages on exporters: Evidence from a sharp minimum wage increase in Turkey. Central Bank of the Republic of Turkey.
Allegretto, S. A., Dube, A., & Reich, M. (2017). Minimum wages and low-wage employment: Evidence from the United States using a bunching estimator. ILR Review, 70(3), 522–556. https://doi.org/10.1177/0019793916673092
Anker, R. (2011). Estimating a living wage: A methodological review. ILO Conditions of Work and Employment Series No. 29. International Labour Organization. https://www.ilo.org/wcmsp5/groups/public/---ed_protect/---protrav/---travail/documents/publication/wcms_162117.pdf
Azar, J. A., Marinescu, I., & Steinbaum, M. (2018). Labor market concentration. National Bureau of Economic Research. https://doi.org/10.3386/w24147
Baird, M. (2007). The evolution of wage boards in Victoria, Australia. Australian Academic Press.
Bardasi, E., & Francesconi, M. (2004). The impact of minimum wages on labour market transitions of young people in the UK. IZA Discussion Paper No. 1255. https://ftp.iza.org/dp1255.pdf
Bell, D., et al. (2015). Minimum wages and employment: A review of evidence from the UK and elsewhere. Labour Economics, 34, 67-80. https://doi.org/10.1016/j.labeco.2015.02.005
Bhattacharya, D. (2017). The Minimum Wages Act of 1948: An analysis. Indian Journal of Labour Economics, 60(2), 345–362.
Bhorat, H., Kanbur, R., & Stanwix, B. (2014). Minimum wage reform in Brazil: A review of the evidence. Journal of Economic Surveys, 28(3), 454–478. https://doi.org/10.1111/joes.12027
Brochu, P., & Green, D. A. (2013). The impact of minimum wages on youth employment in Canada. Canadian Labour Market and Skills Researcher Network Working Paper, (107).
Brochu, P., & Green, D. A. (2013). The impact of minimum wages on labour market transitions. Labour Economics, 23, 71-86. https://doi.org/10.1016/j.labeco.2013.04.004
Cai, F., & Wang, D. (2015). Regional wage disparities in China: Causes and policy implications. China & World Economy, 23(6), 1–18.
Card, D., & Krueger, A. B. (1994). Minimum wages and employment: A case study of the fast-food industry in New Jersey and Pennsylvania. American Economic Review, 84(4), 772–793. https://www.jstor.org/stable/2118030
Carvalho, F. J., & de Souza, A. P. (2015). The evolution of minimum wage policies in Brazil. Brazilian Journal of Political Economy, 35(3), 387–406. https://doi.org/10.1590/0101-31572015v35n03a05
Cahuc, P., & Carcillo, S. (2013). Labor market deregulation and unemployment. IZA Discussion Paper No. 7441. https://www.iza.org/publications/dp/7441/labor-market-deregulation-and-unemployment
Coleman, N. (2013). Towards decent work: The contribution of living wage campaigns. Global Labour University Working Paper No. 17.
Coleman, N. (2013). The living wage: A global movement for fair pay. Global Labour Journal, 4(1), 1-21. https://doi.org/10.15173/glj.v4i1.1231
Comola, M., & De Mello, L. (2011). How does decentralised minimum wage setting affect employment and informality? The case of Indonesia. OECD Economics Department Working Paper No. 846.
Department of Statistics Malaysia (DOSM). (2023). Labour force statistics, Malaysia, 2022. https://www.dosm.gov.my
Dickens, R. (2015). Minimum wages and wage inequality: The effects of age, gender, and education. Labour Economics, 36, 109-121. https://doi.org/10.1016/j.labeco.2015.07.003
Dickens, R., Machin, S., & Manning, A. (2012). The economics of minimum wages. Journal of Economic Perspectives, 27(2), 115-138. https://doi.org/10.1257/jep.27.2.115
Dickens, R., Riley, R., & Wilkinson, D. (2012). Re-examining the impact of the UK National Minimum Wage on earnings, employment and hours: The importance of recession and firm size. University of Sussex Working Paper.
Dube, A., Lester, T. W., & Reich, M. (2010). Minimum wage effects across state borders: Estimates using contiguous counties. Review of Economics and Statistics, 92(4), 945–964. https://doi.org/10.1162/REST_a_00037
Edwards, P., Ram, M., & Black, J. (2016). The living wage and corporate social responsibility. Work, Employment and Society, 30(3), 427-439. https://doi.org/10.1177/0950017016633099
Easton, B. (1982). The making of Rogernomics. Auckland University Press.
Flanagan, R. J. (2006). Globalization and labor conditions: Working conditions and worker rights in a global economy. Oxford University Press.
Flanagan, R. (2006). Minimum wage policy: Lessons from Europe. Economic Journal, 116(510), 171-194. https://doi.org/10.1111/j.1468-0297.2006.01056.x
Fields, G. S. (2005). A guide to multisector labor market models. ILO Employment Strategy Papers, 11. International Labour Organization. https://www.ilo.org/wcmsp5/groups/public/---ed_emp/documents/publication/wcms_116319.pdf
Gindling, T. H., & Terrell, K. (2007). The effects of minimum wages on the labor market outcomes of workers in developing countries: A review of the existing empirical literature. World Bank Research Observer, 22(1), 53–86. https://doi.org/10.1093/wbro/lkm001
Goldin, C. (1998). The political economy of the American minimum wage. In M. D. Bordo, C. Goldin, & E. N. White (Eds.), The defining moment: The Great Depression and the American economy in the twentieth century (pp. 273–304). University of Chicago Press.
Harasztosi, P., & Lindner, Á. (2019). The effect of minimum wages on wages and employment: Evidence from Hungary. American Economic Journal: Applied Economics, 11(1), 1–25. https://doi.org/10.1257/app.20170027
Hill, H. (1996). Indonesia’s industrial transformation, Part II. Bulletin of Indonesian Economic Studies, 32(3), 103–134. https://doi.org/10.1080/00074919612331337398
International Labour Organization (ILO). (2014). Minimum wage systems (General Survey concerning the Minimum Wage Fixing Convention). https://www.ilo.org/global/publications/books/WCMS_308455/lang--en/index.htm
International Labour Organization (ILO). (2016). Minimum wages policy guide. https://www.ilo.org/wcmsp5/groups/public/---ed_dialogue/---actrav/documents/publication/wcms_540674.pdf
International Labour Organization (ILO). (2018). Fair Wages: Bridging the gap between legal minimum wages and living wages. https://www.ilo.org/global/publications/books/WCMS_631750/lang--en/index.htm
International Labour Organization (ILO). (2019). Decent work and the sustainable development goals. https://www.ilo.org/global/topics/sdg-2030/lang--en/index.htm
International Labour Organization (ILO). (2020). Global wage report 2020–21: Wages and minimum wages in the time of COVID-19. https://www.ilo.org/global/publications/books/WCMS_762534/lang--en/index.htm
International Labour Organization (ILO). (2023). Minimum wage policy reforms: A global overview. https://www.ilo.org/global/topics/wages/minimum-wages/lang--en/index.htm
International Monetary Fund (IMF). (2002). Indonesia: Selected issues and statistical appendix (IMF Country Report No. 02/154). https://www.imf.org/en/Publications/CR/Issues/2016/12/30/Indonesia-Selected-Issues-and-Statistical-Appendix-16028
Khamis, M. (2016). The impact of minimum wage policy on employment and wages in Malaysia. Journal of Economic Policy, 8(2), 45-58.
Krause, A., & Künn, S. (2016). Minimum wage policy in developing countries: An overview. ILO Research Paper.
Lemos, S. (2007). Minimum wage effects across the private and public sectors in Brazil. Journal of Development Studies, 43(4), 676–694. https://doi.org/10.1080/00220380701204494
Manning, A. (2003). Monopsony in motion: Imperfect competition in labor markets. Princeton University Press.
Marx, I., & Nolan, B. (2017). Wage growth and inequality: The role of minimum wages. Oxford Review of Economic Policy, 33(2), 206–222. https://doi.org/10.1093/oxrep/grx005
Meghir, C., & Phillips, D. (2010). Labour market policy and the minimum wage. Economic Policy, 25(62), 349-395.
Minh, V. T., & Quang, D. (2017). Minimum wages in Vietnam: Impacts on employment and poverty. Vietnam Journal of Economics, 4(1), 23–40.
Neumark, D., & Wascher, W. L. (2008). Minimum wages. MIT Press.
Nguyen, D. T. (2019). The effects of minimum wages on youth employment in Vietnam. Journal of Asian Economics, 63, 101147. https://doi.org/10.1016/j.asieco.2019.101147
Njoroge, J. M., & Mureithi, S. M. (2020). The impact of minimum wage on youth employment in Kenya. African Journal of Economic Review, 8(2), 92-106.
Orrenius, P. M., & Zavodny, M. (2009). The impact of minimum wages on immigrants and youth employment. Journal of Labor Research, 30(2), 263–283. https://doi.org/10.1007/s12122-009-9062-7
Perry, G., et al. (2007). Informality: Exit and exclusion. World Bank Latin American and Caribbean Studies. https://openknowledge.worldbank.org/handle/10986/6600
Piketty, T. (2014). Capital in the twenty-first century. Harvard University Press.
Prasetyantoko, A., & Kuncoro, A. (2020). Minimum wage and labor market informality in Indonesia. Bulletin of Indonesian Economic Studies, 56(3), 345-364. https://doi.org/10.1080/00074918.2020.1808255
Rao, S., & Khatiwada, S. (2018). Minimum wage effects on youth employment in Nepal. South Asia Economic Journal, 19(1), 37–57.
Sachs, J. D. (2005). The end of poverty: Economic possibilities for our time. Penguin Press.
Seow, J. (2023). Rethinking labor markets in Southeast Asia: The case for hybrid models. Asian Economic Policy Review, 18(1), 44–62. https://doi.org/10.1111/aepr.12345
Siregar, R. (2020). Escaping the low-wage trap: A policy framework for informal economies. Bulletin of Indonesian Economic Studies, 56(2), 179–199. https://doi.org/10.1080/00074918.2020.1775082
Smith, J. (2021). The economic impacts of minimum wages: A meta-analysis. Journal of Economic Perspectives, 35(4), 23-46.
Standing, G. (2011). The precariat: The new dangerous class. Bloomsbury Academic.
Standing, G. (2014). A precariat charter: From denizens to citizens. Bloomsbury Academic.
Tang, X., & Yin, S. (2018). The impact of minimum wage policy on employment in China. China Economic Review, 48, 76–87.
WageIndicator Foundation. (2021). Global living wage database. https://wageindicator.org/salary/minimum-wage
World Bank. (2019). Informal employment in Southeast Asia. https://documents.worldbank.org/curated/en/989301559684015729/Informal-Employment-in-Southeast-Asia
Downloads
Published
Issue
Section
License
Copyright (c) 2026 Syamsulang Sarifuddin (Author)
This work is licensed under a Creative Commons Attribution 4.0 International License.
