Minimum wage: between economic efficiency an social equity

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Publishing date: Friday, 20 March 2015
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Executive Summary

The minimum wage remains a tool with contradictory outcomes in terms of income redistribution and social equity goals. Essentially, international data shows that increasing minimum wage does not actually contribute to income convergence.

At the same time, the same conflicting conclusions refer to the minimum wage impact on the labor market, with studies showing neutral or even positive influence on employment levels. However, most empirical research shows a rather negative impact on the key labor market prospects, particularly on the young and unskilled labor force.

In Moldova, as in other countries, minimum wage influence on the national economy has an ambiguous character. Thus, despite a noticeable impact on wage distribution at the national level, capping the minimum wage did not offered the expected results. Also, the social equity is threatened by setting a minimum wage below the subsistence levels and its uneven variation depending on the economic sector.

According to the report, given the ambiguous nature of the minimum wage effect on the economy, it is imperative to find a balance between economic efficiency and social equity. Still, taking into consideration the insignificant impact of this tool on income redistribution, efforts shall be focused more on the economic efficiency, ie by minimizing its impact on the labor market.

 

See full report in Romanian

Tags: Natalia Chitii

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