Minimum wages and Lighthouse Effect among Male Self-employed Workers: An Exploratory Analysis of the Non-farm Sector in India

Abstract: The Indian labour market is characterized by large informality and self-employment. While most of the literature on minimum wages has focused on the impact of minimum wages on wages and the employment of the ‘wage earners’, this leaves out a large proportion of the self-employed workforce (non-wage earners). Using the novel data on minimum wages and Periodic Labour Force Survey (PLFS) rounds 2017-18, 2018-19, and 2019-20, this study finds that at higher levels of minimum wages, earnings gap reduces between regular workers and self-employed (own account) workers which is an indicative of the “lighthouse effect”. Keywords: Minimum Wage, Self-Employment, Lighthouse Effect, India JEL Classification Number: J21, J23, J30, J31, J46, J50