The effects of monthly minimum wages on the labor market

We explore the labor market impact of monthly minimum wages utilizing a model suitable for countries adopting monthly, weekly, or daily wage benchmarks. Our findings indicate that, in the absence of overtime regulations, an increase in monthly minimum wages will increase working hours and hourly wages and increase (or decrease) employment when the firm has high (or low) monopsony power. When incorporating overtime alongside its associated compensation, the implications of monthly minimum wages become contingent on the prevailing overtime premiums. We validate these assertions using microdata from China. • The monthly minimum wage affects the labor market differently than the hourly minimum wage. • A rise in monthly minimum wages can lead to longer working hours and higher hourly wages. • The employment impacts of monthly minimum wages vary with firms' monopsony power. • The enforcement of overtime pay regulations is crucial for determining the consequences of monthly minimum wages adjustments.