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The Impact of the Minimum Wage on Employment: An EU Panel Data Analysis

Author

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  • Cristian Valeriu Paun

    (Department of International Business and Economics, Bucharest University of Economic Studies, 010374 Bucharest, Romania)

  • Radu Nechita

    (Department of European Studies and Governance, Babes-Bolyai University, 400090 Cluj Napoca, Romania)

  • Alexandru Patruti

    (Department of European Studies and Governance, Babes-Bolyai University, 400090 Cluj Napoca, Romania)

  • Mihai Vladimir Topan

    (Department of European Studies and Governance, Babes-Bolyai University, 400090 Cluj Napoca, Romania)

Abstract

Minimum wage laws have become one of the most debated state interventions in the economy, being considered by many specialists as a very efficient tool used to correct certain labour market failures. The aim of this paper is to explore the relationship between minimum wage and employment dynamics, with a special focus on some vulnerable categories recognized in the literature (young people, female workers, the elderly, etc.). Thus, we analysed the relation between the dynamics of minimum wages and that of employment in 22 EU countries, panel data (1999–2016). The results suggest a negative impact of the minimum wage on total employment and on sensitive categories (youth, female workers, the elderly). The long-running negative impact holds for all but one group (55–64 years). The models were tested for random and fixed effects and the results were correspondingly adjusted with country and time and random and fixed effects. Cointegration tests and the tests using lagged minimum wage also confirm a robust relationship between the dynamics of the minimum wage and that of employment over time. Our findings are consistent with many previous studies and confirm the recommendations to prudently use this public policy tool.

Suggested Citation

  • Cristian Valeriu Paun & Radu Nechita & Alexandru Patruti & Mihai Vladimir Topan, 2021. "The Impact of the Minimum Wage on Employment: An EU Panel Data Analysis," Sustainability, MDPI, vol. 13(16), pages 1-17, August.
    • Handle: RePEc:gam:jsusta:v:13:y:2021:i:16:p:9359-:d:618260
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    References listed on IDEAS

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    2. Ladislav Suhányi & Alžbeta Suhányiová & Jaroslava Kádárová & Jaroslava Janeková, 2023. "Relationships between Average Wages in the Manufacturing Sector and Economic Indicators of the Manufacturing Sector in the Region of Visegrad Group Countries," Sustainability, MDPI, vol. 15(5), pages 1-19, February.

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