Spillover effects of a minimum wage increase – evidence from Slovenia

Abstract We use distribution regression analysis to study the impact of a 6% increase in the Irish minimum wage on the distribution of hourly wages and household income. Wage inequality, measured by the ratio of wages in the 90th and 10th percentiles and the 75th and 25th percentiles, decreased by approximately 8 and 4%, respectively. The results point towards wage spillover effects up to the 30th percentile of the wage distribution. We show that minimum wage workers are spread throughout the household income distribution and are often located in high-income households. Therefore, while we observe strong effects on the wage distribution, the impact of a minimum wage increase on the household income distribution is quite limited.

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The minimum wage as a wage equality policy: Evidence from North Macedonia

Economic Annals ◽

10.2298/eka1923061p ◽

2019 ◽

Vol 64 (223) ◽

pp. 61-81

Author(s):

Marjan Petreski ◽

Nikica Mojsoska-Blazevski ◽

Mariko Ouchi

Keyword(s):

Minimum Wage ◽

Labour Force ◽

Spillover Effects ◽

Wage Distribution ◽

Wage Increase ◽

Current Policy ◽

Wage Level ◽

Minimum Wage Increase ◽

Wage Increases ◽

Wage Compression

The paper aims to investigate if the minimum wage increase of September 2017 resulted in better wage equality in North Macedonia. The increase of 19% was sizable and included levelling up in the three sectors with a lower minimum wage: textiles, apparel, and leather. We extend the ?cell? approach of Card (1992a) and rely on data from the Labour Force Survey 2017 and 2018. The results suggest that the 2017 increase in the minimum wage had a positive, significant, and robust effect on wages. However, the wage increases were almost entirely positioned on the left side of the wage distribution and implied wage compression up to or around the minimum wage. The bunching around the new minimum wage level ?equalised? workers: those who previously earned the new minimum wage level equalised with the less productive workers who approximated their wage only by the power of the law. Hence, wage equality improved. The results confirm that the minimum wage can be an important wage equality policy, with considerably limited upward spillover effects in the current policy and institutional setup.

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