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Abstract

This research paper explains the economic concepts related to minimum salary definition in an open economy, in order to create more fair policies of minimum salary definition. The effects of minimum salary on investment decisions, technology selection and employment creation are explained. In addition, it summarizes the main systems of minimum salary determination used all over the world. Furthermore, the paper brings some analysis on the policies of minimum salary determination used in Mozambique since 1987. The main findings are: 1) the major determinant of minimum salary in Mozambique is the ability of the government to pay the public workers; 2) there was an increase of real minimum salary in the last four years due to the reduction of inflation, economic growth and annual increases in the minimum salary; 3) the establishment of agricultural minimum salary must be based on specific conditions of agricultural sector, and the difference between industrial and agricultural minimum salary must be reduced gradually; 4) since the economic conditions are heterogenic, the use of only one minimum salary for whole country in not adequate.

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