The Effect of the Minimum Wage on the Competitiveness of Economy Introduction

Anna Krajewska, Piotr Krajewski and Katarzyna Pilat
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Anna Krajewska: University of Lodz, Poland
Piotr Krajewski: University of Lodz, Poland
Katarzyna Pilat: University of Lodz, Poland

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Abstract: The costs of labour are an important factor affecting competitiveness of economy seen both at the macro- and microeconomic levels. One of the constraints which must be taken into account while examining the costs of labour are existing institutional arrangements, including the level of minimum wage and its relation to average wage. The neo-classical theory assumes that increase in minimum wage leads to a number of adverse consequences in the economy: increased wages, fall in employment, inflation, and increase in public expenditure. This paper presents the results of empirical studies conducted in various research centres on the influence of minimum wage on the situation in the labour market. Based on the analysis of statistical data on Poland and other European Union countries an attempt is made to determine the impact of minimum wage on the economy. The main purpose of this paper is to demonstrate that minimum wage affects not only economic aspects of the economy but also plays an important social function and counteracts excessive increase in income disparities. The following data will be used in the paper: variation of statutory minimum wages, minimum wages expressed in purchasing power standards, minimum wage level in relation to average gross and net monthly earnings, an attempt will be made to find correlation between these data and the rate of unemployment, inflation, GDP growth in Poland and the regional level of poverty. The research can be treated as a contribution to the debate on the direction of changes in minimum wage (increase or decrease minimum wage, differentiate minimum wage across regions and young people or maintain uniform level in the country)

Date: 2013
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