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Polarization, employment, participation and minimum wage : Evidence from European local labor markets

Author

Listed:
  • Paul Maarek
  • Elliot Moiteaux

    (Université de Cergy-Pontoise, THEMA)

Abstract

Since 1980, labor markets became increasingly polarized: occupations in the middle of the wage distribution (routine occupations) tend to disappear, and are replaced by low-wage occupations (man- ual occupations) and high-wage occupations (abstract occupations). In the US exible labor market, the decrease of routine occupations has been compensated by massive creation of low-paying occupa- tions, and polarization only had a very limited impact on employment levels. This is not necessarily the case in rigid wage European countries in which the creation of such low-paying jobs is more dif- cult, given the institutional environment. We study the e ect of the reduction of the proportion of routine jobs on the employment rate and the participation rate, conditionally on the value of the min- imum wage, using local labor markets from the European Union Labor Force Survey on 8 countries which have a national minimum wage. Our OLS and IV estimates indicate that the disappearance of routine jobs has a negative impact on labor market outcomes in high-minimum wage countries due to an insucient creation of low-paid occupations. Impact on participation is positive for low minimum wage countries, as labor supply may increase in order to compensate the deterioration of labor market opportunities.

Suggested Citation

  • Paul Maarek & Elliot Moiteaux, 2018. "Polarization, employment, participation and minimum wage : Evidence from European local labor markets," THEMA Working Papers 2018-02, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  • Handle: RePEc:ema:worpap:2018-02
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    Cited by:

    1. José António Pereirinha & Elvira Pereira, 2021. "Living Wages in Portugal: in search of dignity in a highly polarized labour market," Working Papers GHES - Office of Economic and Social History 2021/74, ISEG - Lisbon School of Economics and Management, GHES - Social and Economic History Research Unit, Universidade de Lisboa.

    More about this item

    Keywords

    Polarization; employment; participation; minimum wage; ICT; routine occupations.;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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