Does aging matter in the impact of the minimum wage on inflation?

Aleksandra Majchrowska () and Sylwia Roszkowska

MPRA Paper from University Library of Munich, Germany

Abstract: We examine how demographic changes impact the transmission of minimum wage increases to inflation. The minimum wage growth can raise the prices of goods and services and accelerate inflationary processes. At the same time, a shrinking workforce and changes in its structure could lead to changes in the impact of minimum wage increases on the economy. We use the minimum wage augmented Phillips curve framework extended with the demographic variables. We employ the sample of 21 European Union countries in 2003-2023 and panel data techniques. Our study proves that the strength of the minimum wage pass-through effects on inflation depends on demographic factors. Aging of the workforce and shrinking workforce size weakens the impact of minimum wage increase on inflation. Contrary, a lower proportion of the less educated working-age population strengthens the minimum wage pass-through effects on inflation. Our results have important implications for macroeconomic, minimum wage, and education policies.

Keywords: population ageing; shrinking workforce; minimum wage; inflation (search for similar items in EconPapers)
JEL-codes: J11 J31 J38 (search for similar items in EconPapers)
Date: 2025-01-21
New Economics Papers: this item is included in nep-age, nep-eur, nep-inv and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:123506

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