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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 Todorovic Jemec, Peter Tóth () and Robert Wyszynski ()
Additional contact information
Katalin Bodnár: Magyar Nemzeti Bank
Stefania Iordache: Banca Nationala a Romaniei
Liina Malk: Eesti Pank
Desislava Paskaleva: Bulgarian National Bank
Nataša Todorovic Jemec: Banka Slovenije

No WP 9/2017, Working and Discussion Papers from Research Department, National Bank of Slovakia

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 contributes to the literature by presenting the reactions of firms to rises in the minimum wage 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, which is the adjustment channel most commonly studied in the empirical literature, is 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. Finally, we analyse the different firm-level characteristics that drive the choice of adjustment strategies.

Keywords: minimum wages; 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-lma, nep-mac, nep-sbm and nep-tra
Date: 2017-12
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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 fromCentral and Eastern Europe (2017) Downloads
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