Minimum Wage and Gender Gaps: Evidence from Morocco
This paper examines how minimum wage policies affect gender gaps in employment and wages in a setting characterized by a large informal sector and wide initial gender disparities. Focusing on the Moroccan manufacturing sector, I leverage matched formal employer-employee data to analyze the impacts of a 24% real increase in the national minimum wage between 2009-2015. During this period of increases to the minimum wage, the gender pay gap in the formal sector narrows by 21%. Using difference-in-differences designs, I show that this is due in part to a direct effect on workers initially earning below the minimum wage, but also to substantial spillover effects for workers higher up in the wage distribution. Both direct and spillover effects are larger for women. Female workers who remain in formal employment are also more likely to transition to larger, higher-paying firms. However, I also document a displacement effect: the share of low-wage female workers leaving formal employment increases by 22%, while male workers remain unaffected. Firm closure, which disproportionately affects firms employing more women, explains 40% of the disemployment effect. I find that most impacted women transition to the informal sector, where wages are substantially lower. Examining heterogeneity across local labor markets, I further show that displacement effects are larger when women have a reduced set of formal sector outside options. Overall, even when accounting for the displacement effect, minimum wage remains an effective tool for reducing gender pay inequality.