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The Subminimum Wage Reform in Greece and the Labour-Labour Substitution Hypothesis

Author

Listed:
  • Theano Kakoulidou
  • Panagiotis Konstantinou
  • Thomas Moutos

Abstract

The paper examines the effects of the age-differentiated decreases in the minimum wage which Greece implemented in 2012, and which involved the introduction of a subminimum wage as a result of the reduction of the minimum wage by 22% for workers aged 25 and above, and by 32% for those aged less than 25. Using data from the Greek Labor Force Survey, we estimate probit models and find that after the reform there was no statistically significant change in the differential employment probability advantage for private sector employees aged 25-27 over those aged 22-24. We also find that the probability of labour force participation for individuals in the 25-27 group becomes significantly higher (relative to the 22-24 group), which is reflected in a (statistically) significant improvement in the relative job finding rate for non-agricultural, private-sector employees of this group after the reform. Moreover, the reform had no significant differential impact on employment terminations; i.e. it had no differential impact on either dismissals or quits. These findings remain unaltered to a series of robustness checks.

Suggested Citation

  • Theano Kakoulidou & Panagiotis Konstantinou & Thomas Moutos, 2018. "The Subminimum Wage Reform in Greece and the Labour-Labour Substitution Hypothesis," CESifo Working Paper Series 7273, CESifo.
    • Handle: RePEc:ces:ceswps:_7273
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    References listed on IDEAS

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    Cited by:

    1. Andreas Georgiadis & Ioannis Kaplanis & Vassilis Monastiriotis, 2018. "Greece after the Bailouts: The Impact of Minimum Wages on Wages and Employment: Evidence from Greece," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 131, Hellenic Observatory, LSE.
    2. Georgiadis, Andreas & Kaplanis, Ioannis & Monastiriotis, Vassilis, 2018. "The impact of minimum wages on wages and employment: evidence from Greece," LSE Research Online Documents on Economics 91959, London School of Economics and Political Science, LSE Library.
    3. Bechlioulis, Alexandros & Chletsos, Michael, 2021. "The differentiated effects of minimum wage reforms on unemployment Evidence from the Greek labor market," MPRA Paper 109327, University Library of Munich, Germany.
    4. Andriopoulou Eirini & Karakitsios Alexandros, 2022. "Unemployment transitions and the role of minimum wage: From pre-crisis to crisis and recovery," IZA Journal of Labor Policy, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 12(1), pages 1-26, January.
    5. Roupakias, Stelios, 2022. "Employment and distributional effects of Greece’s national minimum wage," MPRA Paper 114244, University Library of Munich, Germany.

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    More about this item

    Keywords

    minimum wages; sub-minimum reform; employment; Greece;
    All these keywords.

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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