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The ratio of the minimum wage to the average wage in the economy increased significantly between the years 1996 and 2003. The increase was a gradual one that occurred following the latest legal update of the minimum wage in 1997 (except for a one-time increase in the minimum wage in 2003). The analysis by the authors shows that main reason for the gradual increase was the slow rate of increase of the nominal wage in the economy.
The wage of women in the lowest wage quintile rose much faster than that of women in the higher quintiles, and evidence was found that the change in the minimum wage made a major contribution to this development. A large part of the change in the wage cannot be explained by changes in personal characteristics (e.g., educational level) or by changes in the return to those characteristics. Furthermore, the wage of women in the lowest quintile is almost fully correlated with the minimum wage. Based on these findings, the authors assess that the minimum wage made a considerable contribution to the increase in the wage of women on relatively low pay; and also made a considerable contribution, although a less significant one, to the increase in the wage of relatively poorly paid men.
Despite the rapid rise in the wage of women in the lowest quintile--relative to both the wage of men and to the wage of other women--the minimum wage made only a small contribution in absolute terms to narrowing average gender wage gaps in the private sector.
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