The Minimum Wage in Firms’ Organizations: Productivity Implications

Nicholas Lawson, Claire Lelarge and Grigorios Spanos

No 18425, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We exploit a unique policy setting in France (2003–2006), where multiple minimum wages coexisted, and show that higher minimum wages reduce firm-level employment, flatten hierarchies, increase training and raise revenue productivity per worker. We construct and calibrate a general equilibrium model of optimal hierarchies that rationalizes these findings: higher minimum wages lead firms to rely on more skilled workers who become less dependent on supervision, which results in flatter organizations and endogenous productivity gains that partly offset aggregate output losses. These losses are amplified in economies with advanced communication technologies but mitigated with superior information-processing or problem-solving technologies.

Keywords: Minimum wage; Firms organizations; Productivity (search for similar items in EconPapers)
JEL-codes: D21 D22 D24 J23 J30 (search for similar items in EconPapers)
Date: 2023-09
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