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A European Minimum Wage: Implications for Poverty and Macroeconomic Imbalances

Enrica Detragiache (), Christian Ebeke, La-Bhus Jirasavetakul, Yu Shi, Florian Misch, Davide Malacrino, Koralai Kirabaeva and Hyun Woo Park

No 2020/059, IMF Working Papers from International Monetary Fund

Abstract: A hypothetical European Minimum Wage (MW) set at 60 percent of each country’s median wage would reduce in-work poverty but have limited effects on overall poverty, as many poor households do not earn a wage near MW and higher unemployment, higher prices, and a loss of social insurance benefits may erode direct benefits. Turning to competitiveness, since the MW increase to reach the European standard would be larger in euro area countries with excessive external surpluses, the associated real appreciation should help curb existing imbalances. However, a few countries with already weak external positions would experience an undesirable real appreciation.

Keywords: WP; wage-inflation pass-through; wage growth; MW harmonization; wage competitiveness; wage differentiation; pressure mechanism; wage distribution; workers range; influence wage dynamics; IMF staff calculation; current account; wage inequality; Wages; Minimum wages; Labor costs; Wage adjustments; Europe; Global; Central and Eastern Europe; Baltics; Minimum Wage; European Union; Poverty Alleviation; Current Account Rebalancing; Monetary Unions (search for similar items in EconPapers)
Pages: 46
Date: 2020-05-22
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Handle: RePEc:imf:imfwpa:2020/059