Minimum Wages, Earnings, and Worker–Firm Sorting

This paper studies Thailand’s 2012–2013 nationwide minimum-wage reform, which raised wage floors by over 40 percent. Using matched employer–employee data, we study its effects on earnings, employment dynamics, and worker–firm sorting. We estimate a discrete type model that jointly captures heterogeneity in wages and mobility across workers and firms. Earnings rise sharply at the bottom with spillovers well above the new minimum, while employment effects are modest and concentrated among the long-term non-employed. Simulations imply sizable gains in discounted lifetime earnings, driven mainly by higher wages but amplified by mobility changes for high-turnover workers. The reform also alters career wage profiles: entry wages increase for low- and mid-wage workers, but tenure-based wage growth flattens most for mid-wage workers, generating an intertemporal trade-off between higher starting pay and slower subsequent progression. Finally, assortative matching weakens as lower-type workers move up the firm wage ladder, yet revealed-preference measures show that wage-based upgrading does not always translate into higher-valued jobs.