Firms and the minimum wage: profile and profitability

Les entreprises employant des salariés au Smic: quelles caractéristiques et quelle rentabilité ?

Amine Naouas, Michael Orand and Ihssane Slimani Houti
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Amine Naouas: DARES - Direction de l'animation de la recherche, des études et des statistiques - Ministère du Travail, de l'Emploi et de la Santé
Michael Orand: INSEE - Institut national de la statistique et des études économiques (INSEE)
Ihssane Slimani Houti: INSEE - Institut national de la statistique et des études économiques (INSEE)

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Abstract: The objectives of this study are to draw a profile of firms with employees paid at the minimum age level and to examine the correlation between profitability and exposition to the minimum wage. This exposition to the minimum wage is measured through the proportion of the firm's employees affected by the annual increases of the minimum wage. The profitability of the firm is approached through four indicators: margin rate, gross and net economic profitability and financial profitability. The exposition to the minimum wage is greater for smaller, younger, independent and capital intensive firms, especially in the hotel, food service and trade industries. An econometric analysis, controlling firms' size, industry and age, shows no significant link between exposition to the minimum wage and profitability. This doesn't mean that the minimum wage has no effect whatsoever on a firm's profitability. Other mechanisms can interfere, for example the fact that the exposition to the minimum wage and the profitability can be codetermined by unobserved factors, such as the negotiation power of the firm on the labour market. Firms could also have adapted their productivity or the structure of the workforce to the enduring presence of a minimum wage, reaching a form of equilibrium.

Keywords: minimum wage; profitability; salaire minimum; rentabilité (search for similar items in EconPapers)
Date: 2016-10
Note: View the original document on HAL open archive server: https://insee.hal.science/hal-05416615v1
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