Do minimum wages improve early life health? Evidence from developing countries

Abstract

The impact of legislated minimum wages on the early-life health of children living in low and middle-income countries has not been examined. For our analyses, we used data from the Demographic and Household Surveys (DHS) from 57 countries conducted between 1999 and 2013. Our analyses focus on height-for-age z scores (HAZ) for children under 5 years of age who were surveyed as part of the DHS. To identify the causal effect of minimum wages, we utilized plausibly exogenous variation in the legislated minimum wages during each child’s year of birth, the identifying assumption being that mothers do not time their births around changes in the minimum wage. As a sensitivity exercise, we also made within family comparisons (mother fixed effect models). Our final analysis on 49 countries reveal that a 1% increase in minimum wages was associated with 0.1% (95% CI = -0.2, 0) decrease in HAZ scores. Adverse effects of an increase in the minimum wage were observed among girls and for children of fathers who were less than 35 years old, mothers aged 20-29, parents who were married, parents who were less educated, and parents involved in manual work. We also explored heterogeneity by region and GDP per capita at baseline (1999). Adverse effects were concentrated in lower-income countries and were most pronounced in South Asia. By contrast, increases in the minimum wage improved children’s HAZ in Latin America, and among children of parents working in a skilled sector. Our findings are inconsistent with the hypothesis that increases in the minimum wage unconditionally improve child health in lower-income countries, and highlight heterogeneity in the impact of minimum wages around the globe. Future work should involve country and occupation specific studies which can explore not only different outcomes such as infant mortality rates, but also explore the role of parental investments in shaping these effects.