MINIMUM WAGES IN CAMBODIA 19 often have differential impacts at different points of the distribution. For instance, in the United States, the impact is limited to those at the low end of the distribution.<sup>16</sup> In the contexts of other developing countries as well, the impact of minimum wages are likely to be different based on different parts of the wage distribution (see del Carpio, Messina and Sanz-de Galdeano, 2018, for example). In this section, I estimate Equation (6) using quantile regressions to characterize the impact in various points of the wage distribution.

Indeed, minimum wage hike affects wage earnings differently at various quantiles of the garment and non-garment wage distributions. The estimates for the garment sector shows positive and increasing impact at the 60<sup>th</sup> or higher quantiles with magnitudes ranging from 2-6 percent (Figure 6). At lower quantiles, the impact is statistically insignificant with some point estimates below zero for the bottom 40<sup>th</sup> quantiles. The impact on female wage earnings distribution display a similar, but muted, pattern. Impacts above the 60<sup>th</sup> quantiles are statistically significant with impacts ranging between 2-4 percent. Impacts at lower quantiles are lower and statistically insignificant, but with positive magnitude of impact.

The impact on hourly wages in the garment sector also mimics the patter of monthly wage earnings, but are more precisely estimated. The impact in the distribution of hourly wages range from 1 to 6 percent with statistically significant impact above the 30th quantile (Figure 7). At lower quantiles, the impacts are lower and statistically insignificant. For females as well, the impact ranges from 1.5 - 4 percent with higher, and statistically significant, impacts at higher quantiles.

The pattern of the quantile treatment effects of minimum wage hike in the garment sector suggests that the impacts are far from a mechanical effect of price change at the bottom of the wage distribution. One possible explanation is that minimum wage hike changes the compensation scheme of garment sector workers in addition to raising the price floor. Typically, garment firms in Cambodia use the minimum wage as an anchor for the entire wage distribution of its workers. Lowest-skilled workers typically receive the minimum wage and get a performance bonus based on their individual productivity. A hike in minimum wages also changes pay structure so that the target to receive performance bonus becomes tougher. Hence, for the least-productive workers, a hike in minimum wage does not increase their take-home pay as they can no longer receive the performance bonus. But for more productive workers, they receive the higher minimum wages as well as the bonus. The wages

> 16In fact, many studies of minimum wages are limited to employment and wage impact in low-wage labor markets defined by certain sectors (like Card and Krueger, 1994; Addison, Blackburn and Cotti, 2012, for restaurant workers), or age (for instance Card, 1992; Neumark, Salas and Wascher, 2014, for teens), or those earning below a threshold level of wage (like Jardim et al., 2018). Studies in other developed countries also focus on specific low-wage sectors (like Machin, Manning and Rahman, 2003, for home care sector).