Minimum Wages and Worker Retention: The Roles of Labour Concentration and Employment Protection

Andy Snell (), Enzo Almeida (), Pedro Martins and Jonathan Thomas ()
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Andy Snell: University of Edinburgh
Enzo Almeida: University of Torino and Collegio Carlo Alberto
Jonathan Thomas: University of Edinburgh

No 18914, IZA Discussion Papers from IZA Network @ LISER

Abstract: How are incumbent workers impacted by minimum wage increases? Is labour market concentration an important moderating factor? We address these questions by presenting a new model, drawing on comprehensive employer-employee matched panel data from Portugal, and considering individual mandated wage rises from both national and collectively bargained minimum wages. We find that employment protection plays a key role in these effects: workers under permanent contracts are almost completely insulated from the exit hazards associated with wage bites while workers in temporary (fixed-term) contracts are exposed to these hazards. Labour concentration can significantly reduce negative effects on temporary workers, by up to 60\%. A model of monopsonistic competition with firing costs rationalises these patterns.

Keywords: minimum wages; collective bargaining; temporary contracts; labour market power (search for similar items in EconPapers)
JEL-codes: J23 J38 J42 J63 (search for similar items in EconPapers)
Date: 2026-09
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Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp18914

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