The Impact of Minimum Wage on Economic Growth: Empirical Analysis on Developed and Developing Countries

Abstract

The minimum wage is a contentious and divisive subject, with numerous viewpoints and studies. Therefore, the global economic crisis that lasted from 2018 to 2019 had a significantly different impact on economic growth in developed and developing countries. The main objective of this paper is to examine the impact of minimum wage implementation on economic growth in developed and developing countries during the recession period. This paper used a method where its data was retrieved from the World Development Indicators (WDI) database as main sources from 2015 to 2019. 20 countries from developed and developing countries were selected with a similar frequency of minimum wage determination which is monthly rate. The results shows that, there are different impact of minimum wage on economic growth in developed and developing countries, where the implementation of the minimum wage has a direct and long term impact on the developed countries, as it has a positive impact on the economic growth. Based on this empirical data, it appears that not all economic conditions during a recession, such as growth, employment and unemployment, would improve as an implementation of minimum wage, due to uncertain effects.