What is the Role of Minimum Wages in Addressing Precarious Employment in the Informal and Formal Sectors? Findings from a Systematic Review

Abstract

This article presents synthesized evidence from 16 studies examining initiatives with potential to mitigate workers’ exposure to precarious employment through the adoption of minimum wage policies. All studies were set in low-income countries and focused on both formal and informal workers. A systematic review of evaluated initiatives addressing precarious employment identified the evidence. We consider minimum wage policies as initiatives that could address precarious employment because of the central role of minimum wages in establishing employment terms for workers in precarious situations. We include initiatives aimed at formal and informal workers, given that precarious employment can exist in both sectors, that these workers share concerns regarding income and would benefit from minimum wage policies. The findings imply that minimum wage policies could increase precariously employed workers’ financial compensation, although with some differences and with little or no effect on employment security. It is not feasible to extend these conclusions beyond low-income economies due to differences with high-income economies in how the mechanisms through which minimum wage policies could impact worker compensation and employment security. However, they should serve as a reminder for high-income economies, many of which experience expanding informal sectors, about the need for related research and policy.