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Setting the minimum wage

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  • Boeri, Tito

Abstract

The process leading to the setting of the minimum wage so far has been overlooked by economists. There are two common ways of setting national minimum wages: they are either government legislated or the byproduct of collective bargaining agreements, which are extended erga omnes to all workers. We develop a simple model relating the level of the minimum wage to the setting regime. Next, we exploit a new data set on minimum wages in 68 countries having a statutory national minimum level of pay in the period 1981–2005. We find that a Government legislated minimum wage is lower than a wage floor set within collective agreements. This effect survives to several robustness checks and can be interpreted as a causal effect of the setting regime on the level of the minimum wage.

Suggested Citation

  • Boeri, Tito, 2012. "Setting the minimum wage," Labour Economics, Elsevier, vol. 19(3), pages 281-290.
    • Handle: RePEc:eee:labeco:v:19:y:2012:i:3:p:281-290
    DOI: 10.1016/j.labeco.2012.01.001
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    More about this item

    Keywords

    Minimum wages; Collective bargaining; Statutory minimum;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets

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