Heterogeneous effects of minimum wage on labor market outcomes: A case study from Turkey

Enes Işık; Özgür Orhangazi; Hasan Tekgüç

doi:10.2478/izajolp-2020-0016

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Heterogeneous effects of minimum wage on labor market outcomes: A case study from Turkey

IZA Journal of Labor Policy

Volume 10 (2020): Issue 1 (March 2020)

By: Enes Işık, Özgür Orhangazi and Hasan Tekgüç

Open Access

|Nov 2020

Figures & Tables

National minimum wage/average wage ratio.
*Notes*: OECD countries in 2016, based on OECD data.

Real minimum wage level in Turkey, 2003–2016.
*Notes*: Based on Turkstat’s CPI and Labor and Social Security Ministry’s minimum wage data.

Wage groups potentially affected by the minimum wage increase in 2016, by education.
*Notes*: Own calculations based on the 2015 and 2016 waves of Turkish Household Labor Force Survey. The sample includes full-time wage employment in the private sector by education groups (471,271 individuals). Tertiary educated workers are those with 2- or 3-years higher education, or 4 years higher education, or master’s degree (5- or 6-years faculty included) or doctorate. 711TL cutoff is 75% of the lowest minimum wage level in 2015; 1300TL is the minimum wage level in 2016. To read the A panel, for example, around 55% of workers with no high school degree earned less than 1300TL but higher than 711TL in 2015.

Wage groups potentially affected by the minimum wage increase in 2016, by age groups.
*Notes*: Own calculations based on the 2015 and 2016 waves of Turkish Household Labor Force Survey. The sample includes full-time wage employment in the private sector by age groups (471,271 individuals). 711TL cutoff is 75% of the lowest minimum wage level in 2015; 1300TL is the minimum wage level in 2016. To read the A panel, for example, around 60% of workers aged 15–24 earned less than 1300TL but higher than 711TL in 2015.

Wage distribution in full-time wage employment in the private sector.
*Notes*: Own calculations based on the 2013 to 2016 waves of Turkish Household Labor Force Survey. The sample includes full-time wage employment in the private sector by informality status. The vertical line shows the minimum wage level in the first half of that year.

Fraction of young or less than high school educated workers potentially affected by the increase in the minimum wage in 2016.
*Notes*: Own calculations based on the 2015 wave of the Turkish Household Labor Force Survey. The sample includes full-time wage employment in the private sector. The figures show the regional distribution of young or less than high school educated workers earning higher than 711TL but lower than 1300TL in 2015.

Testing parallel trend assumption: Labor market outcomes of workers with no high school degree during the period of 2013–2016.
*Notes*: Own calculations based on the 2013 to 2016 waves of Turkish Household Labor Force Survey. The sample includes full-time wage employment in the private sector. *More Impacted* regions are ones in which the fraction of workers affected by the increase (workers earning less than 1300TL but higher than 711TL in 2015) in the minimum wage in 2016 is higher than the median fraction. There are 13 NUTS-2 *More Impacted* and 13 NUTS-2 *Less Impacted* regions.

Testing parallel trend assumption: Labor market outcomes of young (15–24) workers during the period of 2015–2016.
*Notes*: Own calculations based on the 2013 to 2016 waves of Turkish Household Labor Force Survey. The sample includes full-time wage employment in the private sector. *More Impacted* regions are ones in which the fraction of workers affected by the increase (workers earning less than 1300TL but higher than 711TL in 2015) in the minimum wage in 2016 is higher than the median fraction. There are 13 NUTS-2 *More Impacted* and 13 NUTS-2 *Less Impacted* regions.

Table 1

Descriptive statistics

	Less impacted regions						More impacted regions
	2014		2015		2016		2014		2015		2016
Overall labor force statistics	M	F	M	F	M	F	M	F	M	F	M	F
Working-age population (000)	15760	15567	15861	15735	16111	15935	9774	9877	9981	10004	10098	10106
Full-time wage employment (FTWE) (000)	7453	2889	7647	3057	7708	3211	3841	1093	3999	1248	4000	1311
Full time wage employment ratio	0.47	0.19	0.48	0.19	0.48	0.20	0.39	0.11	0.40	0.12	0.40	0.13
Informal (FTWE) (000)	806	348	761	336	736	337	793	308	791	316	747	311
Informality (FTWE)	0.11	0.12	0.10	0.11	0.10	0.10	0.21	0.28	0.20	0.25	0.19	0.24
Average wages (FTWE) (TL)	1697	1575	1867	1709	2163	2035	1424	1273	1557	1394	1832	1693
Change in average wages			10.02%	8.58%	15.80%	19.02%			9.27%	9.43%	17.74%	21.46%
Average informal wages (FTWE) (TL)	1002	772	1134	856	1306	1011	841	665	913	720	1072	837
Change in average informal wages			13.24%	10.90%	15.12%	18.15%			8.50%	8.24%	17.48%	16.30%

Labor force statistics by selected demographic groups

Less than high school emp. (FTWE)	0.40	0.10	0.40	0.10	0.40	0.11	0.32	0.06	0.33	0.07	0.32	0.07
Tertiary educated emp. (FTWE)	0.67	0.54	0.68	0.53	0.67	0.53	0.66	0.47	0.67	0.49	0.65	0.48
15-24 employment (FTWE)	0.32	0.16	0.32	0.17	0.30	0.17	0.26	0.09	0.27	0.10	0.25	0.10
35-44 employment (FTWE)	0.62	0.23	0.63	0.26	0.62	0.27	0.53	0.15	0.55	0.17	0.54	0.18
Less than high school informality (FTWE)	0.18	0.28	0.16	0.26	0.16	0.26	0.31	0.53	0.31	0.49	0.29	0.48
Tertiary educated informality (FTWE)	0.02	0.02	0.02	0.02	0.02	0.01	0.03	0.03	0.03	0.03	0.03	0.02
15-24 informality (FTWE)	0.24	0.16	0.23	0.16	0.20	0.14	0.44	0.38	0.44	0.35	0.42	0.30
35-44 informality (FTWE)	0.06	0.12	0.06	0.10	0.06	0.09	0.14	0.26	0.13	0.24	0.11	0.22
Less than high school average wage (FTWE) (TL)	1228	909	1353	1007	1588	1246	1057	771	1160	850	1398	1060
Tertiary educated average wage (FTWE) (TL)	2819	2290	3010	2468	3362	2798	2468	2057	2603	2154	2895	2518
15-24 average wage (FTWE) (TL)	1078	1062	1195	1159	1467	1449	916	907	1015	1004	1215	1256
35-44 average wage (FTWE) (TL)	1892	1728	2086	1844	2389	2208	1607	1408	1729	1482	2029	1777

[i] Notes: Own calculations based on the 2014 to 2016 waves of Turkish Household Labor Force Survey. More Impacted regions are ones in which the fraction of workers affected by the increase (workers earning less than 1300TL but higher than 711TL in 2015) in the minimum wage in 2016 is higher than the median fraction. There are 13 NUTS-2 More Impacted and 13 NUTS-2 Less Impacted regions.

Table 2

Wage effects, baseline estimation using the baseline fraction affected exposure variable

	Monthly wages			Hourly wages
	Overall	Male	Female	Overall	Male	Female
By education	(1)	(2)	(3)	(4)	(5)	(6)
No high school degree	0.321***	0.475***	−0.140	0.327***	0.616***	−0.205
	(0.091)	(0.074)	(0.206)	(0.085)	(0.111)	(0.250)
High school degree	0.353***	0.316***	0.443***	0.338***	0.362***	0.504***
	(0.054)	(0.051)	(0.087)	(0.060)	(0.070)	(0.117)
Higher degree	0.471***	1.013***	0.468***	0.512***	1.170***	0.551***
	(0.151)	(0.186)	(0.095)	(0.137)	(0.187)	(0.101)
By age
15–24	0.110	0.364*	−0.055	0.215	0.668**	0.035
	(0.155)	(0.194)	(0.251)	(0.202)	(0.271)	(0.297)
25–34	0.410***	0.299***	0.535***	0.403***	0.345***	0.527***
	(0.069)	(0.052)	(0.073)	(0.059)	(0.050)	(0.081)
35–44	0.372***	0.287***	0.617***	0.304***	0.337***	0.559***
	(0.109)	(0.064)	(0.109)	(0.088)	(0.065)	(0.113)
45–54	0.508***	0.589***	0.576	0.448***	0.658***	0.596
	(0.165)	(0.081)	(0.465)	(0.147)	(0.076)	(0.510)
55–64	0.640**	0.829**	−0.141	0.674***	0.880**	−0.052
	(0.276)	(0.327)	(0.336)	(0.241)	(0.332)	(0.327)
Individual level control	YES	YES	YES	YES	YES	YES
Standard errors clustered at NUT2-level	YES	YES	YES	YES	YES	YES
Year and region fixed effects	YES	YES	YES	YES	YES	YES
5 regions x year effects	YES	YES	YES	YES	YES	YES

[i] Notes: The wage sample is full-time wage employment in the private sector in the Turkish Household Labor Force Survey 2010–2016. It includes 471,271 individuals (362,845 males; 108,426 females). Dependent variables are natural logarithm of monthly wages and of hourly wages. Hourly wages are calculated using the weekly working hour information. The key variable of interest is the fraction of affected workers (the ratio of workers earning higher than 75% of the minimum wage level in year t-1 but lower than the new minimum wage level in year t). Each cell shows the estimates for the interaction of the 2016 dummy and the fraction of affected workers in 2015. Workers with Higher degree are those with 2- or 3-years higher education, or 4 years higher education, or master’s degree (5- or 6-years faculty included) or doctorate. There are 26 NUTS-2 regions. All coefficients are relative to the interaction of the 2010 dummy and the fraction of affected workers in the 2009 variable. In “by education” estimations, age is controlled using dummies for 15–24, 25–34, 35–44, 45–54, and 55–64 age cohorts. Education is controlled using dummies for less than high school, high school, and tertiary education groups in “by age” estimations. ***, **, and * indicate a statistical significance level at the 0.01, 0.05, and 0.1 level, respectively.

Table 3

Employment effects, baseline estimation using the baseline fraction affected exposure variable

	Employment
	Overall	Male	Female
By education	(1)	(2)	(3)
No high school degree	0.041	−0.040	0.055**
	(0.128)	(0.040)	(0.024)
High school degree	−0.033	0.046	−0.008
	(0.079)	(0.058)	(0.023)
Higher degree	−0.015	0.150	0.021
	(0.077)	(0.092)	(0.043)
By age
15–24	0.153	−0.036	−0.008
	(0.209)	(0.074)	(0.040)
25–34	0.072	0.043	−0.020
	(0.169)	(0.050)	(0.019)
35–44	−0.215	−0.029	−0.017
	(0.235)	(0.048)	(0.027)
45–54	−0.166	−0.021	−0.024
	(0.142)	(0.034)	(0.029)
55–64	0.023	−0.031	0.000
	(0.039)	(0.070)	(0.006)
Individual-level control	YES	YES	YES
Standard errors clustered at NUT2-level	YES	YES	YES
Year and region fixed effects	YES	YES	YES
5 regions x year effects	YES	YES	YES

[i] Notes: The employment sample is the working-age population in the Turkish Household Labor Force Survey 2010–2016. It includes 2,361,071 individuals (1,152,475 males; 1,208,596 females). Dependent variable is a dummy variable taking 1 if an individual is a wage earner and working full-time in the private sector. The key variable of interest is the fraction of affected workers (the ratio of workers earning higher than 75% of the minimum wage level in year t-1 but lower than the new minimum wage level in year t). Each cell shows the estimates for the interaction of the 2016 dummy and the fraction of affected workers in 2015. Workers with Higher degree are those with 2- or 3-years higher education, or 4 years higher education, or master’s degree (5- or 6-years faculty included) or doctorate. There are 26 NUTS-2 regions. All coefficients are relative to the interaction of the 2010 dummy and the fraction of affected workers in the 2009 variable. In “by education” estimations, age is controlled using dummies for 15–24, 25–34, 35–44, 45–54, and 55–64 age cohorts. Education is controlled using dummies for less than high school, high school, and tertiary education groups in “by age” estimations. ***, **, and * indicate a statistical significance level at the 0.01, 0.05, and 0.1 level, respectively.

Table 4

Informality effects, baseline estimation using the baseline fraction affected exposure variable

	Informality
	All firms			Firms with less than 10 employees
	Overall	Male	Female	Overall	Male	Female
By education	(1)	(2)	(3)	(4)	(5)	(6)
No high school degree	0.093**	0.018	0.004	0.172**	0.088	0.112
	(0.041)	(0.038)	(0.016)	(0.066)	(0.068)	(0.122)
High school degree	0.037**	0.011	−0.003	−0.003	0.103	−0.087
	(0.015)	(0.033)	(0.016)	(0.043)	(0.074)	(0.093)
Higher degree	0.010	0.001	−0.002	−0.000	0.054	−0.076
	(0.014)	(0.029)	(0.012)	(0.055)	(0.107)	(0.064)
By age
15–24	0.172	0.052	0.021	0.444	0.147	0.337
	(0.125)	(0.063)	(0.024)	(0.264)	(0.205)	(0.224)
25–34	0.038	−0.022	−0.003	0.063	−0.011	0.074
	(0.038)	(0.046)	(0.009)	(0.085)	(0.070)	(0.058)
35–44	0.036	−0.035	−0.006	0.094	0.041	0.062
	(0.043)	(0.029)	(0.014)	(0.073)	(0.046)	(0.062)
45–54	0.022	0.010	−0.000	0.078*	0.128**	0.049
	(0.038)	(0.034)	(0.016)	(0.043)	(0.055)	(0.043)
55–64	0.020	−0.032	−0.002	0.023	0.009	−0.007
	(0.021)	(0.034)	(0.003)	(0.029)	(0.037)	(0.019)
Individual-level control	YES	YES	YES	YES	YES	YES
Standard errors clustered at NUT2-level	YES	YES	YES	YES	YES	YES
Year and region fixed effects	YES	YES	YES	YES	YES	YES
5 regions x year effects	YES	YES	YES	YES	YES	YES

[i] Notes: The informality sample is the working-age population in the Turkish Household Labor Force Survey 2010–2016. It includes 2,361,071 individuals (1,152,475 males; 1,208,596 females). Dependent variable is a dummy variable taking 1 if an individual is a wage earner and working without registered in the Social Security Institution in full-time in the private sector. The key variable of interest is the fraction of affected workers (the ratio of workers earning higher than 75% of the minimum wage level in year t-1 but lower than the new minimum wage level in year t). Each cell shows the estimates for the interaction of the 2016 dummy and the fraction of affected workers in 2015. Workers with Higher degree are those with 2- or 3-years higher education, or 4 years higher education, or master’s degree (5- or 6-years faculty included) or doctorate. There are 26 NUTS-2 regions. All coefficients are relative to the interaction of the 2010 dummy and the fraction of affected workers in the 2009 variable. In “by education” estimations, age is controlled using dummies for 15–24, 25–34, 35–44, 45–54, and 55–64 age cohorts. Education is controlled using dummies for less than high school, high school, and tertiary education groups in “by age” estimations. ***, **, and * indicate a statistical significance level at the 0.01, 0.05, and 0.1 level, respectively.

Share of minimum wage workers in formal and informal sectors by education groups.
*Notes*: Own calculations based on the 2009 to 2016 waves of Turkish Household Labor Force Survey. The sample includes full-time wage employment in private sector by education groups (of 527,149 individuals 410,463 individuals are working formally, while 116,686 are working informally during the sample period). Informal workers are wage earners working full-time without registering in the Social Security Institution. Taking the minimum wage level in the first half of the year as the minimum threshold and the minimum wage level in the second half of the year as the maximum threshold, and allowing a 5% error margin, we discern minimum wage workers. Generalization of the approach yields the following wage condition for minimum wage workers: MW_1t – (MW_1t * 0.05) < *Y_it < MW*_2t + (MW_2t *0.05), where MW_1t is the minimum wage level of the first half of the year t, MW_2t is the minimum wage level of second half of the year *t, Y_it*. is the wage of the worker i in year t. There are some legitimate reasons for workers in the formal sector to earn less than the minimum wage during the survey month. The question relating to earnings asks respondents their earnings in the previous month and some full-time workers might have worked less than whole month because i) they started a new job in the middle of the previous month, ii) they got an unpaid leave to deal with family emergencies; or iii) the workplace was temporarily closed. Moreover, if the respondent was interviewed in January, she is reporting her wages from December of previous year, which is probably less than the 95% of new minimum wage. As can be seen from the figure, the share of formal sector workers with less than minimum wage is stable over the years for all education groups suggesting that these are idiosyncratic issues independent from macroeconomic trends. We thank İnsan Tunalı for pointing out these data issues.

Share of minimum wage workers in formal and informal sectors by age groups.
*Notes*: Own calculations based on the 2009 to 2016 waves of Turkish Household Labor Force Survey. The sample includes full-time wage employment in private sector by age groups (of 527,149 individuals 410,463 individuals are working formally, while 116,686 are working informally during the sample period). Informal workers are wage earners working full-time without registering in the Social Security Institution. Taking the minimum wage level in the first half of the year as the minimum threshold and the minimum wage level in the second half of the year as the maximum threshold, and allowing a 5% error margin, we discern possible minimum wage workers. Generalization of the approach yields the following wage condition for minimum wage workers: MW_1t – (MW_1t * 0.05) < *Y_it < MW*_2t + (MW_2t * 0.05), where MW_1t is the minimum wage level of the first half of the year t, MW_2t is the minimum wage level of second half of the year *t, Y_it* is the wage of the worker i in year t. There are some legitimate reasons for workers in the formal sector to earn less than the minimum wage during the survey month. The question relating to earnings asks respondents their earnings in the previous month and some full-time workers might have worked less than whole month because i) they started a new job in the middle of the previous month, ii) they got an unpaid leave to deal with family emergencies; or iii) the workplace was temporarily closed. Moreover, if the respondent was interviewed in January, she is reporting her wages from December of previous year, which is probably less than the 95% of new minimum wage. As can be seen from the figure, the share of formal sector workers with less than minimum wage is stable over the years for all education groups suggesting that these are idiosyncratic issues independent from macroeconomic trends. We thank İnsan Tunalı for pointing out these data issues.

Wage groups potentially affected by the minimum wage increase in 2016, by informality status.
*Notes*: Own calculations based on the 2015 and 2016 waves of Turkish Household Labor Force Survey. The sample includes full-time wage employment in private sector by education groups (471,271 individuals). Informal workers are wage earners working full-time without registering in the Social Security Institution. 711TL cutoff is 75% of the lowest minimum wage level in 2015, 1300TL is the minimum wage level in 2016. To read the A panel for example, around 50% of workers registered in the Social Security Institution earned lower than 1300TL but higher than 711TL in 2015.

All monthly wage coefficients for the key variables of interest in the baseline wage estimation.
*Notes*: The wage sample is full time wage employment in private sector in Turkish Household Labor Force Survey 2010–2016. It includes 471,271 individuals (362,845 males; 108,426 females). Dependent variables are natural logarithm of monthly wages. The key variable of interest is the ratio of workers earning higher than 75% of minimum wage level in year *t-1* but lower than new minimum wage level in year t. Each row shows the estimates for the interaction of the year t dummy and the fraction of affected workers in year *t-1*. All coefficients are relative to the interaction of the 2010 dummy and the fraction of affected workers in 2009 variable. In “by education” estimations, age is controlled using dummies for 15–24, 25–34, 35–44, 45–54, and 55–64 age cohorts. Education is controlled using dummies for less than high school, high school, and tertiary education groups in “by age” estimations.

All employment coefficients for the key variables of interest in the baseline employment estimation.
*Notes*: The employment sample is working age population in Turkish Household Labor Force Survey 2010–2016. It includes 2,361,071 individuals (1,152,475 males; 1,208,596 females). Dependent variable is a dummy variable taking 1 if an individual is a wage earner and working full-time in private sector. The key variable of interest is the ratio of workers earning higher than 75% of minimum wage level in year *t-1* but lower than new minimum wage level in year t. Each row shows the estimates for the interaction of the year t dummy and the fraction of affected workers in year *t-1*. All coefficients are relative to the interaction of the 2010 dummy and the fraction of affected workers in 2009 variable. In “by education” estimations, age is controlled using dummies for 15–24, 25–34, 35–44, 45–54, and 55–64 age cohorts. Education is controlled using dummies for less than high school, high school, and tertiary education groups in “by age” estimations.

All informality coefficients for the key variables of interest in the baseline informality estimation.
*Notes*: The informality sample is working age population in Turkish Household Labor Force Survey 2010–2016. It includes 2,361,071 individuals (1,152,475 males; 1,208,596 females). Dependent variable is a dummy variable taking 1 if an individual is a wage earner and working without registered in the Social Security Institution in full-time in private sector. The key variable of interest is the fraction of affected workers (the ratio of workers earning higher than 75% of minimum wage level in year *t-1* but lower than new minimum wage level in year t). Each row shows the estimates for the interaction of the year t dummy and the fraction of affected workers in year *t-1*. All coefficients are relative to the interaction of the 2010 dummy and the fraction of affected workers in 2009 variable. In “by education” estimations, age is controlled using dummies for 15–24, 25–34, 35–44, 45–54, and 55–64 age cohorts. Education is controlled using dummies for less than high school, high school, and tertiary education groups in “by age” estimations

The regional fraction of workers earned less than 711 Turkish liras and the regional informality ratio.
*Notes*: Own calculations based on the 2015 wave of Turkish Household Labor Force Survey. The sample includes full-time wage employment in private sector (68,649 individuals). 711TL cutoff is 75% of the lowest minimum wage level in 2015. To read the figure for example, around 70% of workers earned less than 711TL and approximately 20% of workers worked without social security in TRC3 region in 2015.

Table A1

Wage effects, alternative estimation using the alternative exposure variables or excluding outlier regions

	Fraction of formal affected		Fraction at minimum		Excluding outlier regions
	Male	Female	Male	Female	Male	Female
By education	(1)	(2)	(3)	(4)	(5)	(6)
No high school degree	0.482***	0.184	0.566***	0.103	0.535***	−0.249
	(0.114)	(0.218)	(0.096)	(0.283)	(0.068)	(0.200)
High school degree	0.392***	0.540***	0.328***	0.587***	0.318***	0.467***
	(0.071)	(0.096)	(0.079)	(0.100)	(0.050)	(0.089)
Higher degree	1.283***	0.549***	1.286***	0.504***	1.069***	0.469***
	(0.240)	(0.112)	(0.239)	(0.130)	(0.195)	(0.092)
By age
15–24	0.336*	0.246	0.426**	0.144	0.522**	−0.201
	(0.196)	(0.196)	(0.196)	(0.274)	(0.206)	(0.258)
25–34	0.321***	0.522***	0.311***	0.578***	0.296***	0.521***
	(0.068)	(0.087)	(0.069)	(0.113)	(0.052)	(0.075)
35–44	0.277***	0.463**	0.347***	0.603***	0.279***	0.582***
	(0.081)	(0.197)	(0.081)	(0.161)	(0.065)	(0.126)
45–54	0.852***	0.321	0.733***	0.318	0.631***	0.594
	(0.174)	(0.428)	(0.117)	(0.437)	(0.076)	(0.488)
55–64	1.927***	−0.467	0.933**	−0.219	1.005***	−0.154
	(0.195)	(0.564)	(0.391)	(0.342)	(0.328)	(0.342)
Individual level control	YES	YES	YES	YES	YES	YES
Standard errors clustered at NUT2-level	YES	YES	YES	YES	YES	YES
Year and region fixed effects	YES	YES	YES	YES	YES	YES
5 regions x year effects	YES	YES	YES	YES	YES	YES

[i] Notes: The wage sample is full time wage employment in private sector in Turkish Household Labor Force Survey 2010–2016. Full sample includes 471,271 individuals (362,845 males; 108,426 females). Dependent variables are natural logarithm of monthly wages. Formal numerator is the ratio of formal workers earned higher than 75% of minimum wage level in year t-1 but lower than new minimum wage level in year t in full time wage employment in private sector. Fraction at is the ratio of minimum wage workers in t-1 whose wages are lower than 110% of the minimum wage but higher than 90% of the minimum wage. The last three columns show the models where TRA2, TRB2, TRC2, and TRC3 NUTS-2 regions are excluded. Each cell shows the estimates for the interaction of the 2016 dummy and the fraction of affected workers in 2015. Workers with Higher degree are those with 2- or 3-years higher education, or 4 years higher education, or master’s degree (5- or 6-years faculty included) or doctorate. There are 26 NUTS-2 regions. All coefficients are relative to the interaction of the 2010 dummy and the fraction of affected workers in 2009 variable. In “by education” estimations, age is controlled using dummies for 15–24, 25–34, 35–44, 45–54, and 55–64 age cohorts. Education is controlled using dummies for less than high school, high school, and tertiary education groups in “by age” estimations. ***, **, and * indicates statistical significance level at the 0.01, 0.05, and 0.1 level, respectively.

Table A2

Employment effects, alternative estimation using the alternative exposure variables or excluding outlier regions

	Fraction of formal affected		Fraction at minimum		Excluding outlier regions
	Male	Female	Male	Female	Male	Female
By education	(1)	(2)	(3)	(4)	(5)	(6)
No high school degree	−0.001	0.033	−0.068	0.042	−0.078**	0.073***
	(0.046)	(0.022)	(0.050)	(0.027)	(0.035)	(0.025)
High school degree	0.088	0.009	0.060	0.022	0.058	−0.007
	(0.068)	(0.028)	(0.066)	(0.035)	(0.056)	(0.024)
Higher degree	0.156	0.021	0.211	0.044	0.119	0.024
	(0.106)	(0.046)	(0.125)	(0.044)	(0.104)	(0.044)
By age
15–24	−0.070	−0.046	0.028	0.003	0.032	−0.002
	(0.062)	(0.029)	(0.075)	(0.047)	(0.094)	(0.046)
25–34	0.058	−0.031	0.060	−0.000	0.051	−0.016
	(0.049)	(0.022)	(0.063)	(0.023)	(0.051)	(0.021)
35–44	0.047	−0.015	−0.055	−0.031	−0.035	−0.039
	(0.067)	(0.036)	(0.055)	(0.037)	(0.043)	(0.043)
45–54	0.065	−0.001	−0.010	0.002	−0.061*	−0.031
	(0.062)	(0.029)	(0.041)	(0.021)	(0.032)	(0.042)
55–64	−0.229***	−0.011	−0.033	0.018**	−0.052	0.003
	(0.049)	(0.010)	(0.068)	(0.007)	(0.080)	(0.007)
Individual level control	YES	YES	YES	YES	YES	YES
Standard errors clustered at NUT2-level	YES	YES	YES	YES	YES	YES
Year and region fixed effects	YES	YES	YES	YES	YES	YES
5 regions x year effects	YES	YES	YES	YES	YES	YES

[i] Notes: The employment sample is working age population in Turkish Household Labor Force Survey 2010–2016. It includes 2,361,071 individuals (1,152,475 males; 1,208,596 females). Dependent variable is a dummy variable taking 1 if an individual is a wage earner and working full-time in private sector. Formal numerator is the ratio of formal workers earned higher than 75% of minimum wage level in year t-1 but lower than new minimum wage level in year t in full time wage employment in private sector. Fraction at is the ratio of minimum wage workers in t-1 whose wages are lower than 110% of the minimum wage but higher than 90% of the minimum wage. The last three columns show the models where TRA2, TRB2, TRC2, and TRC3 NUTS-2 regions are excluded. Workers with Higher degree are those with 2- or 3-years higher education, or 4 years higher education, or master’s degree (5- or 6-years) or doctorate. There are 26 NUTS-2 regions. All coefficients are relative to the interaction of the 2010 dummy and the fraction of affected workers in 2009 variable. In “by education” estimations, age is controlled using dummies for 15–24, 25–34, 35–44, 45–54, and 55–64 age cohorts. Education is controlled using dummies for less than high school, high school, and tertiary education groups in “by age” estimations. ***, **, and * indicates statistical significance level at the 0.01, 0.05, and 0.1 level, respectively.

Table A3

Informality effects, alternative estimation using the alternative exposure variables or excluding outlier regions

	Fraction of formal affected		Fraction at minimum		Excluding outlier regions
	Male	Female	Male	Female	Male	Female
By education	(1)	(2)	(3)	(4)	(5)	(6)
No high school degree	−0.002	−0.006	0.012	−0.005	0.007	0.012
	(0.053)	(0.014)	(0.045)	(0.020)	(0.038)	(0.014)
High school degree	0.018	−0.012	0.006	−0.010	0.015	−0.002
	(0.036)	(0.016)	(0.038)	(0.016)	(0.033)	(0.018)
Higher degree	−0.019	−0.002	0.015	−0.001	−0.012	−0.003
	(0.032)	(0.015)	(0.035)	(0.016)	(0.031)	(0.013)
By age
15–24	0.007	−0.012	0.054	0.040	0.089	0.034
	(0.060)	(0.032)	(0.063)	(0.029)	(0.087)	(0.023)
25–34	−0.049	0.001	−0.031	0.001	−0.019	−0.001
	(0.053)	(0.009)	(0.054)	(0.011)	(0.047)	(0.009)
35–44	−0.006	−0.022	−0.030	−0.015	−0.032	−0.016
	(0.036)	(0.016)	(0.035)	(0.020)	(0.029)	(0.020)
45–54	0.016	−0.002	0.010	0.001	0.007	0.001
	(0.052)	(0.013)	(0.044)	(0.012)	(0.034)	(0.023)
55–64	−0.063	0.000	−0.008	0.004	−0.045	−0.001
	(0.047)	(0.005)	(0.038)	(0.004)	(0.036)	(0.003)
Individual level control	YES	YES	YES	YES	YES	YES
Standard errors clustered at NUT2-level	YES	YES	YES	YES	YES	YES
Year and region fixed effects	YES	YES	YES	YES	YES	YES
5 regions x year effects	YES	YES	YES	YES	YES	YES

[i] Notes: The informality sample is working age population in Turkish Household Labor Force Survey 2010–2016. It includes 2,361,071 individuals (1,152,475 males; 1,208,596 females). Dependent variable is a dummy variable taking 1 if an individual is a wage earner and working without registered in the Social Security Institution in full-time in private sector. Formal numerator is the ratio of formal workers earned higher than 75% of minimum wage level in year t-1 but lower than new minimum wage level in year t in full time wage employment in private sector. Fraction at is the ratio of minimum wage workers in t-1 whose wages are lower than 110% of the minimum wage but higher than 90% of the minimum wage. The last three columns show the models where TRA2, TRB2, TRC2, and TRC3 NUTS-2 regions are excluded. Workers with Higher degree are those with 2- or 3-years higher education, or 4 years higher education, or master’s degree (5- or 6-years) or doctorate. Each cell shows the estimates for the interaction of the 2016 dummy and the fraction of affected workers in 2015. Workers with Higher degree are those with 2- or 3-years higher education or faculty, or 4 years higher education, or master’s degree (5- or 6-years faculty included) or doctorate. There are 26 NUTS-2 regions. All coefficients are relative to the interaction of the 2010 dummy and the fraction of affected workers in 2009 variable. In “by education” estimations, age is controlled using dummies for 15–24, 25–34, 35–44, 45–54, and 55–64 age cohorts. Education is controlled using dummies for less than high school, high school, and tertiary education groups in “by age” estimations. ***, **, and * indicates statistical significance level at the 0.01, 0.05, and 0.1 level, respectively.

Table A4

Lighthouse effects, effects of the minimum wage increase on informal wages, the baseline fraction affected exposure variable

	Monthly informal wage			Hourly informal wage
	Overall	Male	Female	Overall	Male	Female
By education	(1)	(2)	(3)	(4)	(5)	(6)
No high school degree	0.232	0.539**	−0.128	0.205	0.670***	−0.187
	(0.195)	(0.196)	(0.295)	(0.203)	(0.230)	(0.370)
High school degree	0.331	0.445**	−0.031	0.312	0.517**	0.193
	(0.221)	(0.203)	(0.461)	(0.195)	(0.199)	(0.488)
Higher degree	0.527	1.990***	0.909*	0.841**	2.336***	1.472**
	(0.339)	(0.551)	(0.473)	(0.357)	(0.484)	(0.591)
By age
15–24	−0.018	0.185	−0.465	0.289	0.607	−0.051
	(0.345)	(0.352)	(0.546)	(0.441)	(0.489)	(0.627)
25–34	0.582***	0.430***	0.622**	0.568**	0.508***	0.620*
	(0.205)	(0.148)	(0.256)	(0.207)	(0.164)	(0.306)
35–44	0.303	0.539***	0.606*	0.268	0.645***	0.295
	(0.308)	(0.139)	(0.296)	(0.245)	(0.144)	(0.355)
45–54	0.506	0.492**	0.593*	0.347	0.536***	0.488
	(0.304)	(0.210)	(0.294)	(0.287)	(0.168)	(0.334)
55–64	0.700**	0.779*	−0.308	0.672**	0.779*	−0.150
	(0.297)	(0.396)	(0.463)	(0.264)	(0.387)	(0.414)
Individual level control	YES	YES	YES	YES	YES	YES
Standard errors clustered at NUT2-level	YES	YES	YES	YES	YES	YES
Year and region fixed effects	YES	YES	YES	YES	YES	YES
5 regions x year effects	YES	YES	YES	YES	YES	YES

[i] Notes: The lighthouse effect sample is full time informal wage employment in private sector in Turkish Household Labor Force Survey 2010–2016. It includes 100,157 individuals (77,387 males; 22,770 females). Dependent variables are natural logarithm of monthly wages and of hourly wages. Hourly wages are calculated using the weekly working hour information. The key variable of interest is the fraction of affected workers (the ratio of workers earned higher than 75% of minimum wage level in year t-1 but lower than new minimum wage level in year t). Each cell shows the estimates for the interaction of the 2016 dummy and the fraction of affected workers in 2015. Workers with Higher degree are those with 2- or 3-years higher education, or 4 years higher education, or master’s degree (5- or 6-years) or doctorate. There are 26 NUTS-2 regions. All coefficients are relative to the interaction of the 2010 dummy and the fraction of affected workers in 2009 variable. In “by education” estimations, age is controlled using dummies for 15–24, 25–34, 35–44, 45–54, and 55–64 age cohorts. Education is controlled using dummies for less than high school, high school, and tertiary education groups in “by age” estimations. ***, **, and * indicates statistical significance level at the 0.01, 0.05, and 0.1 level, respectively.