The Impact of Minimum Wages on Employment, Wages and Welfare: The Case of Vietnam

The paper investigates the impact of recent minimum wage changes on wages, employment and household welfare in Vietnam. It finds that minimum wage changes reduce the total number of wage workers (especially in domestic firms) and increases the incidence of self-employment. The number of wage workers declines because many wage workers with informal contracts lose their jobs, but only a fraction of the job loss is absorbed by the creation of self-employment or formal jobs. In addition, minimum wages help raise the average wages of workers who keep their jobs. In terms of welfare, an increase in minimum wage reduces poverty and raises household income and consumption expenditure, most importantly in education-related expenditures