Effects of minimum wage in Tanzania: the case of textile industries in Dar es Salaam

This paper analyzes the effects of minimum wage on employment in textile industries in Tanzania where three firms were used as a case study. The study found that minimum wage, to some extent affects the level of employment in large firms contrary to small and medium firms. Furthermore, the study indicated that the most affected group of workers are casual labourers who face disemployments after the rise of minimum wage as the neoclassical models predicts that employment will fall if the minimum wages highly rises. But this theory only applies to large firms contrary to small and medium firms. The mixed results from the study illustrate that the minimum wage was not the only factor that affects the level of employment but other factors may influence employment effects as well, like market fluctuations with low and high seasonality need also be taken into consideration. Relevance to Development Studies Tanzania is a poor country and the lack of decent work, unemployment and poverty are the major challenges of the country’s development. This paper aims at analysing the employment effect caused by the new minimum wage in textile manufacturing industries. The sector employs a large number of low paid workers in urban areas and thereby contributing to reduction unemployment and household poverty. The paper is concerning with minimum wage policy as an important tool for economic and social policy, is providing a range of policy goal including eliminating exploitative working conditions, combating unfair competition and wages, ensuring decent wage and poverty reduction.