Beyond Employment Effects: A Holistic Analysis of Minimum Wage Impacts on Economic Welfare in Selected Asian Economies

Abstract

The persistent challenge of poverty and income inequality remains a key concern for policymakers across developing nations. Among the many strategies considered to address these socio-economic issues, the role of the minimum wage stands out as both critical and contentious. This study aims to examine the impact of minimum wage policies on economic welfare in fifteen selected Asian countries over a defined period, using panel data analysis. The countries chosen represent diverse economic backgrounds, enabling a broader understanding of the effects in varying contexts. To investigate these relationships, this study employs econometric techniques including Fixed Effects and Random Effects models. The Hausman test is applied to determine the most appropriate model, confirming that the Fixed Effects model best suits the data by accounting for country-specific heterogeneity. The results indicate that minimum wage has a significant and positive impact on economic welfare in several of the countries studied. Notably, the findings suggest that a well-implemented minimum wage policy can foster GDP growth and reduce poverty, although the effects on unemployment and income inequality are mixed and context-dependent. Factors such as inflation, poverty rates, and income distribution (measured by the Gini index) were also examined, with some variables demonstrating stronger correlations than others. Overall, this study highlights the potential of minimum wage policies to act as a tool for improving economic welfare in developing Asian economies, provided they are implemented alongside complementary socio-economic reforms. The evidence encourages further exploration of minimum wage structures tailored to the specific economic and institutional settings of each country.