aggregate employment and wage statistics and/or small-sample surveys which might not be representative of all realities of a country, making the use of state-of-the-art methodological techniques impossible. For this reason, for developing countries, there is a greater share of evidence exploiting cross-country variation (see Belman and Wolfson, 2016, for a more in-depth methodological review of minimum wage studies in developing countries). Across the world, Sub-Saharan Africa is the region with the least evidence of the economic effects of minimum wage. Bhorat et al. (2017) argues in favor of the release of country-level earnings and employment data at regular intervals for a more substantive country-focused minimum wage research agenda.

# **4.2 Minimum Wage**

Most countries in the world have a minimum wage: statutory or negotiated minimum wages exist in 90% of the 187 ILO member countries.<sup>8</sup> But there are important differences across countries when it comes to setting it. Minimum wages can be set at the national and/ or the sub-national level (i.e., region, city or firm level); there can be different minimum wages for different workers (for example, teenagers and trainees are subject to lower minimum wage levels in some countries); and it is common that some sectors are excluded _de jure_ (as in the case of domestic workers, self-employed and unpaid family members) or _de facto_ (like informal workers).

While in high-income countries having several minimum wages could help avoid adverse economic effects (decreased employment, price rises, etc.), especially when there is heterogeneity across regions and across workers in skills and experience (Ahlfeldt et al., 2022)<sup>9</sup> ; in low-income countries more complex minimum wage systems, with differences at the subnational level, have been associated with lower levels of compliance than national regulations (Rani et al., 2013). Low compliance is an issue, particularly in developing countries where the size of the informal sector is much greater than in developed countries. Since the degree of compliance determines the extent to which the minimum wage will have an economic impact, the complexity of the minimum wage system is an important aspect for policy makers to consider.

There are also different setting regimes. Minimum wage regulation can be set by the government (i.e., statutory), or negotiated by trade unions and employers’ associations. The wage-setting system impacts not only the support for the policy—by definition, collectively bargained minimum wages involve in the discussion a wider share of the society and thus tend to gather more support—but also the level at which the minimum wage is set. When it is set by collective bargaining, it tends to be at a higher level than when it is government-legislated (Boeri, 2012). This might have implications for the level of compliance both in developing (Rani et al., 2013) and developed countries (Judge and Stansbury, 2020), as higher minimum wage levels are associated with lower compliance, even in the case where the minimum wage is the one labor regulation with more resources devoted to its enforcement.

As the degree of compliance determines the extent of the economic impact that minimum wage

> 8See International Labour Office (2020)

> 9Ahlfeldt et al. (2022) argue that an employment-maximizing regional minimum wage would lead to a similar aggregate welfare effect as a welfare-maximizing federal minimum wage while increasing employment by 1.1% instead of reducing it by 5.6%.

38