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What Explains Differences in Minimum Wage Growth Between EU Member States?

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  • Baumann Arne

    (Federal Institute for Occupational Safety and Health (BAuA), Noeldnerstrasse 40-42, 10317 Berlin, Germany)

Abstract

There are considerable differences in minimum wage growth between EU member states with national minimum wages. Potential sources for these differences are discrepancies in economic fundamentals and institutional differences in how minimum wages are adjusted. Using a novel dataset based on macroeconomic data, institutional information on minimum wage setting and data on economic policy orientation and elections, the article tests whether growth differences in the minimum wage of 21 EU member states during the time period 2000 to 2020 can be explained by a catch-up dynamic in new EU member states, by different growth models of EU member states or by differences in the actors that are responsible for the adjustment of minimum wages. The results show that across the entire sample and irrespective of actors, minimum wage growth follows consumer price inflation and wage growth most closely. Higher than average minimum wage growth rates in EU member states stem from overshooting inflation during the period of EU accession, reducing wage inequality and increasing the Kaitz index. Actors also mattered for minimum wage growth. Adjustments by social partner consensus led to higher minimum wage growth than the benchmark of indexed minimum wages, introducing a distributive element to minimum wage adjustments.

Suggested Citation

  • Baumann Arne, 2025. "What Explains Differences in Minimum Wage Growth Between EU Member States?," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 245(1-2), pages 7-44.
    • Handle: RePEc:jns:jbstat:v:245:y:2025:i:1-2:p:7-44:n:1004
    DOI: 10.1515/jbnst-2023-0039
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • P51 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems

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