An estimation of the impact changes in the minimum wage have on employment

The existence of a mandatory minimum wage is widespread among developed countries, the main aim being to enhance social equity. From a strictly economic standpoint, however, the theoretical literature emphasises that a minimum wage can also have an adverse impact on employment for certain groups of workers, especially those whose productivity level is below the minimum wage set by the authorities. In empirical terms, the studies available are not fully conclusive on the size and significance of this possible impact. Some studies find that increases in the minimum wage do not have a significantly adverse effect on employment [for example, Card and Krueger (1994 and 1995) for the US labour market], whereas others find that they do [Neumark and Wascher (2000)]. For the case of Spain, in general the available studies show that there are adverse effects on younger workers, while for all other workers the findings are generally negligible [see, for example, Dolado et al (1996)]. In this setting, the increases in the minimum wage seen in Spain between 2004 and 2010 provide an interesting case study for a more in-depth empirical analysis of this issue. The data contained in the Social Security Administrative Labour Records (Muestra Continua de Vidas Laborales, hereinafter MCVL), which are the data used here, are particularly useful for this purpose, as they provide detailed individual information on workers’ employment histories. The article is structured as follows: the second section summarises the development of the minimum wage in Spain in recent decades and compares it with the situation in other European countries; the third section briefly explains the methodology employed to analyse the impact of the recent increases in the minimum wage and describes the key findings; and the fourth section summarises the main conclusions.