ABSTRACT
Although the new law likely increases the cost for severance pay and minimum wage,
previous works indicate that the real application of the law might not be as influential as
previously predicted. Del Carpio et al. (2012), for example, observed that the employment
effect of minimum wages is only significant and negative among smaller firms and less-
educated workers; it is not significant for larger firms with semi-skilled and skilled
workers. Brusentsev et al. (2012) concluded that the compliance rate for the payment of
severance pay is low; that is, only a third of entitled workers report receiving the sever-
ance pay and workers collect only about 40% of the payment. While there are indications
that impact of the new labor is limited, one cannot neglect that some impacts do exist.
