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Minimum Wage Violation in Central and Eastern Europe

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  • Goraus-Tanska, Karolina

    () (University of Warsaw)

  • Lewandowski, Piotr

    () (Institute for Structural Research (IBS))

Abstract

Minimum wages continue to be at the centre of the policy debates in both developed and emerging economies. Such policies can only be effective if (1) the existing regulatory system does not have gaps that allow for the payment of wages below the minimum wage, and (2) the existing minimum wage laws are not violated (too often). In this paper we analyse minimum wage violations in 10 Central and Eastern European countries that have joined the EU since 2004, and that have statutory national minimum wages. Utilising EU-SILC data, we use the methodology proposed by Bhorat et al. (2013) to analyse both the incidence of minimum wage violations, as well as the monetary depth of these violations. We find that on average in 2003-2012, the estimated incidence of violations ranged from 1.0% in Bulgaria, to 1.3% in the Czech Republic, around 3% in Romania and Slovenia, 4.7% in Poland and Hungary, 5.6% in Latvia, and 6.9% in Lithuania. The average pay shortfall ranged from 13.7% of the country-year specific minimum wage in Estonia, to 41.7% in Slovenia. In all countries, workers who were female, less-educated, in the service or agricultural sector, in a micro firm, or with a temporary contract were more likely than other categories of workers to earn less than the minimum wage they were entitled to. While higher minimum to average wage ratios were associated with higher levels of non-compliance, this effect was present within countries over time, but not between them.

Suggested Citation

  • Goraus-Tanska, Karolina & Lewandowski, Piotr, 2016. "Minimum Wage Violation in Central and Eastern Europe," IZA Discussion Papers 10098, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp10098
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    Cited by:

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    2. Lewandowski, Piotr & Góra, Marek & Lis, Maciej, 2017. "Temporary Employment Boom in Poland: A Job Quality vs. Quantity Trade-off?," IZA Discussion Papers 11012, Institute of Labor Economics (IZA).
    3. Dautovic, Ernest & Hau, Harald & Huang, Yi, 2017. "The Consumption Response to Minimum Wages: Evidence from Chinese Households," CEPR Discussion Papers 12057, C.E.P.R. Discussion Papers.
    4. Katalin Bodnár & Ludmila Fadejeva & Stefania Iordache & Liina Malk & Desislava Paskaleva & Jurga Pesliakaitė & Nataša Todorović Jemec & Peter Tóth & Robert Wyszyński, 2018. "How do firms adjust to rises in the minimum wage? Survey evidence from Central and Eastern Europe," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 7(1), pages 1-30, December.
    5. Albinowski, Maciej & Lewandowski, Piotr, 2020. "The Heterogenous Regional Effects of Minimum Wages in Poland," IZA Discussion Papers 13412, Institute of Labor Economics (IZA).
    6. Piotr Lewandowski & Iga Magda, 2018. "The labor market in Poland, 2000−2016," IZA World of Labor, Institute of Labor Economics (IZA), pages 426-426, February.
    7. Andrea Garnero, 2018. "The dog that barks doesn’t bite: coverage and compliance of sectoral minimum wages in Italy," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 7(1), pages 1-24, December.
    8. Clemens, Jeffrey & Strain, Michael R., 2019. "Understanding "Wage Theft": Evasion and Avoidance Responses to Minimum Wage Increases," IZA Discussion Papers 12167, Institute of Labor Economics (IZA).
    9. Koch, Andreas & Kirchmann, Andrea & Reiner, Marcel & Scheu, Tobias & Zühlke, Anne & Bonin, Holger, 2020. "Verhaltensmuster von Betrieben und Beschäftigten im Kontext des gesetzlichen Mindestlohns," IZA Research Reports 97, Institute of Labor Economics (IZA).

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    More about this item

    Keywords

    minimum wage; violation; compliance; Central Eastern Europe;
    All these keywords.

    JEL classification:

    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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