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Do Minimum Wages Make Wages more Rigid? Evidence from French Micro Data
[Les salaires minima rendent-ils les salaires plus rigides? Résultats à partir de salaires individuels en France]

Author

Listed:
  • Erwan Gautier

    (Banque de France, Nantes Univ - Nantes Université)

  • Sébastien Roux

    (INSEE - Institut national de la statistique et des études économiques (INSEE), INED - Institut national d'études démographiques, CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - Groupe ENSAE-ENSAI - Groupe des Écoles Nationales d'Économie et Statistique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - Groupe ENSAE-ENSAI - Groupe des Écoles Nationales d'Économie et Statistique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique)

  • Milena Suarez Castillo

    (INSEE - Institut national de la statistique et des études économiques (INSEE), CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - Groupe ENSAE-ENSAI - Groupe des Écoles Nationales d'Économie et Statistique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - Groupe ENSAE-ENSAI - Groupe des Écoles Nationales d'Économie et Statistique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique)

Abstract

How do minimum wages (MW) shape the aggregate wage dynamics when wage adjustment is lumpy? In this paper, we document new empirical findings on the effects of MW on wage rigidity using quarterly micro wage data matched with sectoral bargained MW. We first estimate a micro empirical model of wage rigidity taking into account minimum wage dynamics. We then use a simulation method to investigate implications of lumpy micro wage adjustment for the aggregate wage dynamics. Our main findings are the following. Both national and sectoral MW have a large effect on the timing and on the size of wage adjustments. At the aggregate level, MW contribute to amplify, by a factor of 1.7, the response of wages to past inflation. Ignoring MW leads to underestimate the speed of aggregate wage adjustment by about a year. The elasticities of wages with respect to past inflation, the national MW and industry-level MW are respectively 0.42, 0.17 and 0.16. Finally, there are significant spillover effects of the NMW on higher wages transiting through industry-level MW.

Suggested Citation

  • Erwan Gautier & Sébastien Roux & Milena Suarez Castillo, 2019. "Do Minimum Wages Make Wages more Rigid? Evidence from French Micro Data [Les salaires minima rendent-ils les salaires plus rigides? Résultats à partir de salaires individuels en France]," Working Papers hal-05397604, HAL.
    • Handle: RePEc:hal:wpaper:hal-05397604
    Note: View the original document on HAL open archive server: https://insee.hal.science/hal-05397604v1
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    2. Carbonnier, Clément & Malgouyres, Clément & Py, Loriane & Urvoy, Camille, 2022. "Who benefits from tax incentives? The heterogeneous wage incidence of a tax credit," Journal of Public Economics, Elsevier, vol. 206(C).
    3. Effrosyni Adamopoulou & Ernesto Villanueva, 2020. "Wage Determination and the Bite of Collective Contracts in Italy and Spain: Evidence From the Metalworking Industry," CRC TR 224 Discussion Paper Series crctr224_2020_176, University of Bonn and University of Mannheim, Germany.
    4. Adamopoulou, Effrosyni & Villanueva, Ernesto, 2022. "Wage determination and the bite of collective contracts in Italy and Spain," Labour Economics, Elsevier, vol. 76(C).
    5. A. Moutaabbid, 2024. "Les determinants de la dynamique des salaires en France : approches macro et sectorielles par la courbe de Phillips," Documents de Travail de l'Insee - INSEE Working Papers 2024-20, Institut National de la Statistique et des Etudes Economiques.

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    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General

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