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Firm-level Effects of Minimum Wages

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  • Olena Chorna

Abstract

We investigate how increases in minimum wage affect various firm-level characteristics. We study firm-level data from Poland, where the minimum wage experienced a large and persistent increase in 2008 and 2009. We show that firms which were more exposed to the minimum wage increase faced higher increases in total labour costs and larger reductions in profitability. Intuitively, higher total labour costs driven by higher minimum wages directly reduce firm profits in the absence of price adjustments. We also show that the sharp increases in the minimum wage increased capital and decreased overall labour productivity and employment. The impact of policy is statistically significant only on capital.

Suggested Citation

  • Olena Chorna, 2021. "Firm-level Effects of Minimum Wages," Prague Economic Papers, Prague University of Economics and Business, vol. 2021(4), pages 402-425.
    • Handle: RePEc:prg:jnlpep:v:2021:y:2021:i:4:id:773:p:402-425
    DOI: 10.18267/j.pep.773
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    References listed on IDEAS

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    1. Aleksandra Majchrowska & Paweł Strawiński, 2024. "The evolution of the minimum wage in Poland and its consequences on labour market," Bank i Kredyt, Narodowy Bank Polski, vol. 55(1), pages 55-74.

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    More about this item

    Keywords

    Minimum wage; firm profitability; Kaitz index; difference in differences;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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