Minimum wages and gender inequality in the long run: Evidence from Mexico

with Enrique de la Rosa-Ramos and Valeria Rueda

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Project funded by the 2021 Arthur H. Cole Grant, Economic History Association.

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The recent global health crisis has motivated debates about what policies could achieve more socially just societies. Among the main suggested instruments are minimum wages. Recent literature has gained attention by showing that changes in minimum wages can affect both gender and ethnicity wage inequality. However, this evidence regards to minimum wages established at the national or state level, which overlook local-level conditions that may limit their impact. This paper builds on this literature by studying a non-uniform national minimum wage policy in Mexico. In 1964, 111 minimum-wage zones were established based on demographic, geographic, infrastructure, and labor-market similarities between municipalities. Before the introduction of this policy, minimum wages were autonomously determined by each municipality. We use the 1950, 1960, 1970, and 1980 Mexican censuses to identify whether the introduction of local minimum-wage zones induced changes in individual characteristics and if these changes varied by sex. In particular, we focus on years of schooling, educational attainment, and status in employment (self-employed, salary worker, or unpaid worker): factors that determine individual earnings. We also estimate the effect on gender wage inequality using newly digitized, fine-grained wage data from the Encuesta de Trabajos y Salarios Industriales (Survey of Occupations and Industrial Salaries), an annual survey implemented by the Ministry of Industry and Commerce. The survey reports hourly wages for both men and women. These data are available for 600 occupations by 33 industries and 12 industrial districts located across Mexico. Potential results could inform the minimum-wage debate and have relevant implications for the design of minimum-wage policies in developed and developing countries.