The Effect of Minimum Wage Policy on Unemployment Levels in Enugu State: A Post-2019 Assessment

Minimum wage legislation is a cornerstone of labor market policy designed to guarantee a basic standard of living for workers, yet its employment effects in developing economy contexts remain empirically contested. This study assesses the effect of the 2019 National Minimum Wage Act on unemployment levels in Enugu State from 2019 to 2024, focusing on both formal and informal sector labor dynamics. The study is grounded in the Neo-Classical Labor Market Theory, which predicts that wages set above market-clearing equilibrium generate involuntary unemployment by reducing firms' demand for labor. A survey research design was employed, with data collected from employers, employees, and informal sector workers across three senatorial districts of Enugu State. A sample of 385 respondents was drawn from an estimated target population of 15,000 formal sector employees and 8,000 informal workers using stratified random sampling. Structured questionnaires and data from the National Bureau of Statistics constituted the data instruments. Findings reveal that while compliance with the new minimum wage increased real incomes for covered workers, approximately 22 percent of private sector employers reported reducing staff headcount or increasing contract-based hiring as cost-containment responses. Informal sector employment rose modestly as a potential spillover channel. The study concludes that minimum wage increases in Enugu State produce a trade-off between income gains for retained workers and employment reduction for others. It is recommended that complementary labor market policies, including wage subsidy programs, accompany future minimum wage adjustments to minimize adverse employment effects.

Keywords: Minimum wage, unemployment, labor market, Enugu State, neo-classical theory