The Relationship between Minimum Wage, Employment and Economic Growth: A Case Study in BRICS-T

The classical approach foresee that increases in minimum wages will have a negative impact on labor market and economic growth. In the literature, there are some studies support this foresight as well as studies that reveal findings in the opposite direction. The aim of this paper is to test the accuracy of this foresight in BRICS-T countries between 2005 and 2015. In this study, the relationship between minimum wage, employment and economic growth in the BRICS-T countries during the period of 2005-2015 was examined by Panel VAR model, which succeeded in establishing dynamic interaction. According to the findings of the analysis, the minimum wage affects economic growth positively. It is thought that the employment factor plays a key role in this effect description. The existence of a weak positive relationship between minimum wage and employment also confirms this role. The contribution of this study to the economic literature are that the relationship between minimum wage, employment and economic growth has not been studied in a previously unexamined sample (BRICS- T Countries) and unlike previous models Panel VAR model is used