• Journal of Labour Economics
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• v.39 no.4
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• pp.31-56
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• 2016

This study analyzes the effect of a minimum wage on the wage compression within Korean establishments. The results are as follows. Firstly, increases of a ratio of workers who get minimum wage within establishments have a effect to compress the wage distribution within establishments. Secondly, the establishment average wages get lower as their minimum wage ratios get larger. In this situation, high wage group's wages fall deeply than low wage group's these. Thirdly, the relative wages of high wage group to low wage group tend to be small as their minimum wage ratios get larger. To conclude, a increase of minimum wage has a effect to raise low wage workers' wages directly, and to reduce high wage workers' wages or increase rates indirectly. And the wage distributions are compressed as a result. So government's policy to increase minimum wage will have a result in reducing wage inequality.