Minimum wage policy and inequality in Latin America and the Caribbean

Abstract

We review the minimum wages (MW) literature with a special focus on: (i) the impacts of MW oninequality; (ii) and the importance of labor law enforcement and compliance. We provide noveldescriptive data about the actors and institutions fixing and enforcing minimum wages in the regionintegrating the labor politics and labor economics literatures. Our interpretation of the evidence is thatsetting an ambitiously high MW, and/or turning a blind eye to wage theft, is likely to produce laborinformality and higher inequality. MW policy should avoid both extremes (i.e., neither too low, nor toohigh) to achieve positive outcomes.