Minimum wages and firm employment: Evidence from a minimum wage reduction in Greece

Andreas Georgiadis, Ioannis Kaplanis and Vassilis Monastiriotis ()

Economics Letters, 2020, vol. 193, issue C

Abstract: We investigate firm heterogeneity in responses to minimum wage changes leveraging on a policy reform in 2012 in Greece that introduced a youth sub-minimum through a sharp reduction in the minimum wage that was larger for youth. Using administrative linked employer–employee panel data and a difference-in-differences estimator, we find that, although wages decreased across all firms following the policy reform, adult wages decreased by more, whereas youth wages decreased by less in firms with a higher share of youth in employment. We also find that, in these firms, adult employment increased by more, while youth employment increased by less or even decreased and that these changes reflected mainly new hires rather than job separations. These heterogeneous responses to the change in the minimum wage across firms are not entirely consistent with the competitive model of the labour market.

Keywords: Minimum wage; Wages; Firm employment (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:193:y:2020:i:c:s0165176520301750

DOI: 10.1016/j.econlet.2020.109255

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