Abstract
ABSTRACTThis paper assesses the effect of increases in the Estonian minimum wage in 2013–2016 on the probability of workers at different wage levels retaining employment. The effect is identified by comparing the probability of workers remaining employed after increases in the minimum wage in 2013–2016 with the probability of workers at comparable wage levels remaining employed in the 2009–2011 when the minimum wage was left unchanged. Estimations on data from the Estonian Labour Force Survey show that the increases in the minimum wage in 2013–2016 had no or small and imprecisely estimated effects on employment retention for the directly affected workers and similarly for those indirectly affected. These results are robust to the choice of control variables, to refinements of the treatment group and to changes in the time sample.
Highlights
Distributional concerns and poverty alleviation have attracted increased attention since the global financial crisis
This paper considers the effects on employment retention in Estonia after the substantial minimum wage rises in 2013–2016
This section discusses the methodology that the empirical analysis uses to identify the effect of increases in the minimum wage in Estonia in 2013–2016 on employment retention
Summary
Distributional concerns and poverty alleviation have attracted increased attention since the global financial crisis. The gains from a higher minimum wage may be wiped out if it becomes harder for the workers directly or indirectly affected to retain employment This suggests that it is important to examine the effects of increases in the minimum wage on employment retention. The only formal econometric analysis of the employment effects of the minimum wage for Estonia is the study by Hinnosaar and Rõõm (2003) for Estonia They use micro data from the ELFS for 1995–2000 and a difference-in-differences methodology derived from the working paper version of Neumark et al (2004). They find substantial negative effects on employment retention for those directly affected but little effect for other groups..
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