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Minimum Wages and Worker Retention: The Roles of Labour Concentration and Employment Protection

Author

Listed:
  • Snell, Andy

    (University of Edinburgh)

  • Almeida, Enzo

    (University of Torino and Collegio Carlo Alberto)

  • Martins, Pedro

    (Nova School of Business and Economics)

  • Thomas, Jonathan

    (University of Edinburgh)

Abstract

How are incumbent workers impacted by minimum wage increases? Is labour market concentration an important moderating factor? We address these questions by presenting a new model, drawing on comprehensive employer-employee matched panel data from Portugal, and considering individual mandated wage rises from both national and collectively bargained minimum wages. We find that employment protection plays a key role in these effects: workers under permanent contracts are almost completely insulated from the exit hazards associated with wage bites while workers in temporary (fixed-term) contracts are exposed to these hazards. Labour concentration can significantly reduce negative effects on temporary workers, by up to 60\%. A model of monopsonistic competition with firing costs rationalises these patterns.

Suggested Citation

  • Snell, Andy & Almeida, Enzo & Martins, Pedro & Thomas, Jonathan, 2026. "Minimum Wages and Worker Retention: The Roles of Labour Concentration and Employment Protection," IZA Discussion Papers 18914, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp18914
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    More about this item

    Keywords

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    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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