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How do firms adjust to rises in the minimum wage? Survey evidence from Central and Eastern Europe

Katalin Bodnár, Ludmila Fadejeva, Stefania Iordache, Liina Malk, Desislava Paskaleva, Jurga Pesliakaite (), Nataša Todorović Jemec, Peter Tóth and Robert Wyszynski ()
Additional contact information
Katalin Bodnár: Magyar Nemzeti Bank and European Central Bank
Stefania Iordache: Banca Naţională a României
Liina Malk: Eesti Pank
Desislava Paskaleva: Българска народна банка
Nataša Todorović Jemec: Institute of Macroeconomic Analysis and Development of the Republic of Slovenia
Peter Tóth: Národná banka Slovenska

Authors registered in the RePEc Author Service: Peter Toth () and Peter Tóth ()

No 292, NBP Working Papers from Narodowy Bank Polski, Economic Research Department

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 occurs 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 survey. (search for similar items in EconPapers)
JEL-codes: D22 E23 J31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eur, nep-mac, nep-sbm and nep-tra
Date: 2018
Note: The work was conducted within the framework of the Wage Dynamics Network coordinated by the European Central Bank. We thank Juan Francisco Jimeno, Tairi Rõõm, an anonymous referee and the participants of the WDN meetings for helpful comments.
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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 fromCentral and Eastern Europe (2017) 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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Persistent link: https://EconPapers.repec.org/RePEc:nbp:nbpmis:292

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