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How Do Firms Adjust to Rises in the Minimum Wage? Survey Evidence fromCentral and Eastern Europe

Katalin Bodnar, Ludmila Fadejeva, Stefania Iordache, Liina Malk, Desislava Paskaleva, Jurga Pesliakaite (), Natasa Todorovic Jemec, Peter Tóth () and Robert Wyszynski ()
Additional contact information
Katalin Bodnar: European Central Bank
Stefania Iordache: Banca Nationala a Romaniei,
Liina Malk: Eesti Pank
Desislava Paskaleva: Bulgarian National Bank
Natasa Todorovic Jemec: Banka Slovenije

No 2017/04, Working Papers from Latvijas Banka

Abstract: We study the transmission channels for rises in the minimum wage using a unique firm-level dataset from eight Central and Eastern European countries. Representative samples of firms in each country were asked to evaluate the relevance of a wide range of adjustment channels following specific instances of rises in the minimum wage during the recent post-crisis period. The paper adds to the rest of literature by presenting the reactions of firms as a combination of strategies, and evaluates the relative importance of those strategies. Our findings suggest that the most popular adjustment channels are cuts in non-labour costs, rises in product prices, and improvements in productivity. Cuts in employment are less popular and occur mostly through reduced hiring rather than direct layoffs. Our study also provides evidence of potential spillover effects that rises in the minimum wage can have on firms without minimum wage workers.

Keywords: minimum wage; adjustment channels; firm-level survey (search for similar items in EconPapers)
JEL-codes: D22 E23 J31 (search for similar items in EconPapers)
Date: 2017-12-31
New Economics Papers: this item is included in nep-eur, nep-mac, nep-sbm and nep-tra
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Related works:
Journal Article: How do firms adjust to rises in the minimum wage? Survey evidence from Central and Eastern Europe (2018) Downloads
Working Paper: How do firms adjust to rises in the minimum wage? Survey evidence from Central and Eastern Europe (2018) Downloads
Working Paper: How do firms adjust to rises in the minimum wage? Survey evidence from Central and Eastern Europe (2018) Downloads
Working Paper: How do firms adjust to rises in the minimum wage? Survey evidence from Central and Eastern Europe (2018) Downloads
Working Paper: How do firms adjust to rises in the minimum wage? Survey evidence from Central and Eastern Europe (2017) Downloads
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