Polarization, employment, participation and minimum wage: Evidence from European local labor markets

Paul Maarek and Elliot Moiteaux ()
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Elliot Moiteaux: Université de Cergy-Pontoise, THEMA

No 2018-02, THEMA Working Papers from THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise

Abstract: Since 1980, labor markets became increasingly polarized: occupations in the middle of the wage distribution (routine occupations) tend to disappear, and are replaced by low-wage occupations (man- ual occupations) and high-wage occupations (abstract occupations). In the US exible labor market, the decrease of routine occupations has been compensated by massive creation of low-paying occupa- tions, and polarization only had a very limited impact on employment levels. This is not necessarily the case in rigid wage European countries in which the creation of such low-paying jobs is more dif- cult, given the institutional environment. We study the e ect of the reduction of the proportion of routine jobs on the employment rate and the participation rate, conditionally on the value of the min- imum wage, using local labor markets from the European Union Labor Force Survey on 8 countries which have a national minimum wage. Our OLS and IV estimates indicate that the disappearance of routine jobs has a negative impact on labor market outcomes in high-minimum wage countries due to an insucient creation of low-paid occupations. Impact on participation is positive for low minimum wage countries, as labor supply may increase in order to compensate the deterioration of labor market opportunities.

Keywords: Polarization; employment; participation; minimum wage; ICT; routine occupations. (search for similar items in EconPapers)
JEL-codes: J23 J24 J38 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-eur, nep-lma and nep-ure
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ema:worpap:2018-02

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