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Stemming the Tide: What Have EU Countries Done to Support Low-Wage Workers in an Era of Downward Wage Pressures?

Listed author(s):
  • Marchal, Sarah

    ()

    (University of Antwerp)

  • Marx, Ive

    ()

    (University of Antwerp)

Governments across the EU have been striving to get more people into work while at the same time acknowledging that more needs to be done to 'make work pay'. Yet this drive comes at a time when structural economic shifts are putting pressure on wages, especially of less skilled workers. This article focuses on trends in minimum wages, income taxes, and work-related benefits within a selection of 16 EU countries, for the period 2001-2012, with three US states included as reference cases. We find evidence for eroding relative minimum wages in various EU countries, yet combined with catch-up growth in the new Member States. We also find that governments counteracted eroding minimum wages through direct income support measures, especially for lone parents. Most prevalent among these were substantial declines in income tax liabilities. More generally we see a trend unfolding towards a fiscalization of income support policies.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 9390.

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Length: 30 pages
Date of creation: Sep 2015
Publication status: forthcoming in: Journal of European Social Policy
Handle: RePEc:iza:izadps:dp9390
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  1. Sinn, Hans-Werner, 2002. "EU Enlargement and the Future of the Welfare State," Scottish Journal of Political Economy, Scottish Economic Society, vol. 49(1), pages 104-115, February.
  2. François Rycx & Stephan Kampelmann, 2013. "Who Earns Minimum Wages in Europe? New Evidence Based on Household Surveys," DULBEA Working Papers 13-01, ULB -- Universite Libre de Bruxelles.
  3. Natascha Van Mechelen & Sarah Marchal, 2013. "Trends and convergence of Europe’s minimum income schemes," ImPRovE Working Papers 13/11, Herman Deleeck Centre for Social Policy, University of Antwerp.
  4. Scharpf, Fritz W., 2002. "The European Social Model: Coping with the challenges of diversity," MPIfG Working Paper 02/8, Max Planck Institute for the Study of Societies.
  5. Carlos Farinha Rodrigues, 2012. "Minimum Income in Portugal: Changing the Rules in Times of Crisis," Working Papers Department of Economics 2012/05, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  6. Lane Kenworthy, 2015. "Do employment-conditional earnings subsidies work?," ImPRovE Working Papers 15/10, Herman Deleeck Centre for Social Policy, University of Antwerp.
  7. Freeman, Richard B, 1996. "The Minimum Wage as a Redistributive Tool," Economic Journal, Royal Economic Society, vol. 106(436), pages 639-649, May.
  8. Marx, Ive & Marchal, Sarah & Nolan, Brian, 2012. "Mind the Gap: Net Incomes of Minimum Wage Workers in the EU and the US," IZA Discussion Papers 6510, Institute for the Study of Labor (IZA).
  9. Paetzold, Jörg & van Vliet, Olaf, 2012. "Convergence without hard criteria: Does EU soft law affect domestic unemployment protection schemes?," Working Papers in Economics 2012-9, University of Salzburg.
  10. Natascha Van Mechelen & Sarah Marchal & Tim Goedemé & Ive Marx & Bea Cantillon, 2011. "The CSB-Minimum Income Protection Indicators dataset (CSB-MIPI)," Working Papers 1105, Herman Deleeck Centre for Social Policy, University of Antwerp.
  11. Immervoll, Herwig, 2012. "Reforming the Benefit System to 'Make Work Pay': Options and Priorities in a Weak Labour Market," IZA Policy Papers 50, Institute for the Study of Labor (IZA).
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