Minimum Wage Systems and Earnings Inequalities: Does Institutional Diversity Matter?

Arbeitspapier

This paper explores how the diversity of minimum wage systems affects earnings inequalities within European countries. It relies on the combination of (a) harmonized micro-data from household surveys, (b) data on national statutory minimum wages and coverage rates, and (c) hand-collected information on minimum rates from more than 1,100 sectoral-level agreements across Europe. The analysis covers 18 countries over the period 2007-2009. Empirical results confirm the intuition of many practitioners that the combination of sectoral minimum rates and high coverage of collective bargaining can, at least for earnings inequalities, be regarded as a functional equivalent to a binding statutory minimum wage at the national level. Regression results suggest indeed that both a national statutory minimum wage and, in countries with sectoral-level minima, a higher collective bargaining coverage are significantly associated with lower levels of (overall and inter-industry) wage inequalities and a smaller fraction of workers paid below prevailing minima. Several robustness checks confirm these findings.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 8419

Classification and Topics

• Classification: Wirtschaft ; Wage Level and Structure; Wage Differentials ; Compensation Packages; Payment Methods ; Trade Unions: Objectives, Structure, and Effects
• Subject: wage inequality ; collective bargaining ; minimum wage systems ; Europe

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Garnero, Andrea ; Kampelmann, Stephan ; Rycx, Francois
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/102347
• Last update: 10.03.2025, 11:45 AM CET