Effects of the Statutory Minimum Wage on Employment and Unemployment

This round for the Minimum Wage Commission analysed the introduction of the minimum wage and all increases up to January 2024, with data extending to mid-2024. The analysis was based on official regional-level data, linked to indicators of exposure to the minimum wage and evaluated using several variants of the difference-in-differences approach. A second part focused on the increase to 12 euros in October 2022 and for this purpose drew on the new Earnings Survey and a bunching approach, which makes employment changes along the wage distribution visible. In strongly affected regions, total dependent employment fell by around 0.6 per cent, driven entirely by marginal employment. For employment subject to social insurance contributions as a whole, no effect was found, and none for unemployment either. The declines were most pronounced in regions with low economic dynamism. The largest increase to date, to 12 euros, also had an additional negative effect, though not substantially different in magnitude from earlier steps. Methodologically, the study showed that the classic difference-in-differences estimator understates the effects when the introduction and the subsequent increases are treated as a measure with staggered adoption.