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Social and fiscal impacts of statutory minimum wages in EU countries: A microsimulation analysis with EUROMOD

Author

Listed:
  • Klaus Grünberger

    (European Commission - JRC)

  • Edlira Narazani

    (European Commission - JRC)

  • Stefano Filauro

    (European Commission - Directorate-General for Employment, Social Affairs and Inclusion)

  • Áron Kiss

    (European Commission - Directorate-General for Economic and Financial Affairs)

Abstract

This paper analyses the first-round effects of hypothetical minimum wage increases on social outcomes in 21 EU countries with a statutory national minimum wage based on a microsimulation approach using EUROMOD. The methodological challenges related to the use of available EU household survey data are described, along with the choices made to address these challenges. The paper assesses hypothetical scenarios in which countries with a statutory national minimum wage increase their minimum wage to various reference values, set in relation to the gross national median and average wage. The model simulations suggest that minimum wage increases can significantly reduce in-work poverty, wage inequality and the gender pay gap, while generally improving the public budget balance. The implied wage increases for the beneficiaries are substantial, while the implied increases in the aggregate wage bill and, as a consequence, possible negative employment impacts, are generally modest.

Suggested Citation

  • Klaus Grünberger & Edlira Narazani & Stefano Filauro & Áron Kiss, 2021. "Social and fiscal impacts of statutory minimum wages in EU countries: A microsimulation analysis with EUROMOD," JRC Working Papers on Taxation & Structural Reforms 2021-06, Joint Research Centre.
    • Handle: RePEc:ipt:taxref:202106
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    References listed on IDEAS

    as
    1. Holly Sutherland & Francesco Figari, 2013. "EUROMOD: the European Union tax-benefit microsimulation model," International Journal of Microsimulation, International Microsimulation Association, vol. 1(6), pages 4-26.
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    5. Kai-Uwe Müller & Viktor Steiner, 2009. "Would a Legal Minimum Wage Reduce Poverty? A Micro-simulation Study for Germany," Journal of Income Distribution, Ad libros publications inc., vol. 18(3-4), pages 131-151, September.
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    7. Dale Belman & Paul J. Wolfson, 2014. "What Does the Minimum Wage Do?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number wdmwd, August.
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    More about this item

    Keywords

    minimum wage; microsimulation; European Union; wage inequality; in-work poverty; gender pay gap.;
    All these keywords.

    JEL classification:

    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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