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Why The Minimal Wage Shouldn’T Be Established On The Minimum Consumption Basket?

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  • IONESCU, Gabriela-Mariana

Abstract

The paper examines from the point of view logical and institutional (i.e., behavioral) the concept of minimal wage regarding its establishing, functioning, and impact. The key focus is the comparison of the economic basis of establishing and adjusting of the minimal wage nominal value: on the one hand, the average nominal productivity of the employees, and, on the other hand, the (average) consumption basket. Theoretical arguments will be brought in favor of the conclusion that the minimal nominal wage must be anchored on the average nominal productivity of the employees, while its establishing on the average consumption basket transforms it into a social aid (like the minimal income). Finally, some institutional and methodological suggestions are provided in order to lead to the best choice of the macroeconomic fundamentals of establishing and periodically adjusting the minimal wage.

Suggested Citation

  • IONESCU, Gabriela-Mariana, 2020. "Why The Minimal Wage Shouldn’T Be Established On The Minimum Consumption Basket?," Journal of Financial and Monetary Economics, Centre of Financial and Monetary Research "Victor Slavescu", vol. 8(1), pages 45-52, October.
    • Handle: RePEc:vls:rojfme:v:8:y:2020:i:1:p:45-52
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    References listed on IDEAS

    as
    1. World Bank, 2020. "Global Economic Prospects, January 2020," World Bank Publications - Books, The World Bank Group, number 33044, December.
    2. Patty,John W. & Penn,Elizabeth Maggie, 2014. "Social Choice and Legitimacy," Cambridge Books, Cambridge University Press, number 9780521191012.
    3. Lipset, Seymour Martin, 1959. "Some Social Requisites of Democracy: Economic Development and Political Legitimacy1," American Political Science Review, Cambridge University Press, vol. 53(1), pages 69-105, March.
    4. Clemens, Jeffrey, 2019. "Making Sense of the Minimum Wage: A Roadmap for Navigating Recent Research," MPRA Paper 94324, University Library of Munich, Germany.
    5. Alberto Cavallo, 2020. "Inflation with Covid Consumption Baskets," NBER Working Papers 27352, National Bureau of Economic Research, Inc.
    6. World Bank, 2020. "Global Economic Prospects, June 2020," World Bank Publications - Books, The World Bank Group, number 33748, December.
    7. Patty,John W. & Penn,Elizabeth Maggie, 2014. "Social Choice and Legitimacy," Cambridge Books, Cambridge University Press, number 9780521138338.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    minimal wage; consumption basket; income; social aid; productivity;
    All these keywords.

    JEL classification:

    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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