Minimum Wage: Does it Improve Welfare in Thailand?

We study the causal impact of the minimum wage on labor market outcomes, household consumption, inequality and poverty in Thailand by relying on policy variation in minimum wages over time across provinces. We find that minimum‐wage increases have a large and significant impact on the likelihood of working in the uncovered sector among workers with elementary education. However, the impact is very small and insignificant among other labor market groups. In contrast, the minimum wage has large positive effects on the formal sector wages of low‐earning workers, such as the young, elderly and low educated. Increases in the minimum wage are associated with reductions in household poverty and consumption inequality at the bottom half of the distribution.This research was sponsored by the World Bank under contract 7800772 and the Development Research Funds. Sanz‐de‐Galdeano gratefully acknowledges financial support from the Spanish Ministry of Economy and Competitiveness Grant ECO2014‐58434‐P