The employment effects of minimum wages during the Great Recession and the subsequent recovery: evidence from 17 EU Member States

Abstract

Using data for 17 EU member-states, we examine the employment effects of minimum wages during 2007-2015. The sample period allows us to investigate the employment patterns that are related to minimum wage developments during a period of weak aggregate conditions. Nevertheless, before proceeding to our own estimates, we review the relevant theoretical and empirical literature. As regards our findings, we do not find any adverse employment effects. However, we do not rest on the nonnegative impact of the minimum wage, but instead argue that its effect is not a predetermined outcome. Hence, we also take into count the interaction between the minimum wage and GDP growth, in order to estimate the minimum wage effect during different aggregate conditions. Finally, we also attempt to investigate which minimum wage system is more effective. According to our sample, our estimates indicate that as far as bargaining involves all relevant economic agents, the minimum wage will most likely not lead to disemployment effects.