The Impact of Minimum Wage Hikes on Employment and Wages in Cambodia

Abstract

Using an event-study framework, this paper examines the impact of four minimum wage hikes between 2008 and 2015 on the Cambodian labor market. The analysis finds that, except for immediate adjustments around the time of the hikes, the minimum wage hikes did not affect participation rates in the affected sector -- garments and footwear -- or the unaffected sectors. However, the minimum wage hikes increased wages modestly (3 percent) for workers in the affected sectors and modestly decreased wages (1.5 percent) for workers in the unaffected sectors. The gains for the affected sectors are slightly larger at higher quantiles than at lower quantiles. This is suggestive of a change in compensation structure within the affected firms as a result of the hikes.