Setting the minimum wage

Arbeitspapier

The process leading to the setting of the minimum wage so far has been fairly overlooked by economists. This paper suggests that this is a serious limitation as the setting regime contributes to explain cross-country variation in the fine-tuning of the minimum wage, hence in the way in which the trade-off between reducing poverty among working people and shutting down low productivity jobs is addressed. There are two common ways of setting national minimum wages: they are either government legislated or are the outcome of collective bargaining agreements, which are extended erga omnes to all workers. We develop a simple model relating the level of the minimum wage to the setting regime. Next, we exploit a new data set on minimum wages in 66 countries that had already or introduced a minimum wage in the period 1981-2005 to test the implications of the model. We find that a Government legislated minimum wage is lower than a wage floor set within collective agreements. This effect survives to several robustness checks and hints at a causal relation between the setting regime and the level of the minimum wage.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 4335

Classification and Topics

• Classification: Wirtschaft ; Wage Level and Structure; Wage Differentials ; Labor Contracts ; Monopsony; Segmented Labor Markets
• Subject: Minimum wages ; collective bargaining ; statutory minimum ; Mindestlohn ; Staatliche Preispolitik ; Lohnpolitik ; Tarifpolitik ; Theorie ; Welt

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Boeri, Tito
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2009

Further information

• Handle: http://hdl.handle.net/10419/36129
• URN: urn:nbn:de:101:1-20090909330
• Last update: 10.03.2025, 11:44 AM CET