IDEAS home Printed from https://ideas.repec.org/p/nse/doctra/g2016-09.html
   My bibliography  Save this paper

Firms and the minimum wage: profile and profitability

Author

Listed:
  • A. NAOUAS

    (Dares)

  • M. ORAND

    (Insee)

  • I. SLIMANI HOUTI

    (Insee)

Abstract

The objectives of this study are to draw a profile of firms with employees paid at the minimum age level and to examine the correlation between profitability and exposition to the minimum wage. This exposition to the minimum wage is measured through the proportion of the firms employees affected by the annual increases of the minimum wage. The profitability of the firm is approached through four indicators: margin rate, gross and net economic profitability and financial profitability. The exposition to the minimum wage is greater for smaller, younger, independent and capital intensive firms, especially in the hotel, food service and trade industries. An econometric analysis, controlling firms size, industry and age, shows no significant link between exposition to the minimum wage and profitability. This doesnt mean that the minimum wage has no effect whatsoever on a firms profitability. Other mechanisms can interfere, for example the fact that the exposition to the minimum wage and the profitability can be codetermined by unobserved factors, such as the negotiation power of the firm on the labour market. Firms could also have adapted their productivity or the structure of the workforce to the enduring presence of a minimum wage, reaching a form of equilibrium.

Suggested Citation

  • A. Naouas & M. Orand & I. Slimani Houti, 2016. "Firms and the minimum wage: profile and profitability," Documents de Travail de l'Insee - INSEE Working Papers g2016-09, Institut National de la Statistique et des Etudes Economiques.
    • Handle: RePEc:nse:doctra:g2016-09
    as

    Download full text from publisher

    File URL: https://www.bnsp.insee.fr/ark:/12148/bc6p06zrddd/f1.pdf
    File Function: Document de travail de la DESE numéro G2016-09
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Mirko Draca & Stephen Machin & John Van Reenen, 2011. "Minimum Wages and Firm Profitability," American Economic Journal: Applied Economics, American Economic Association, vol. 3(1), pages 129-151, January.
    2. Andreas P. Georgiadis, 2006. "Is the Minimum Wage Efficient? Evidence of the Effects of the UK National Minimum Wage in the Residential Care Homes Sector," The Centre for Market and Public Organisation 06/160, The Centre for Market and Public Organisation, University of Bristol, UK.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Peter Harasztosi & Attila Lindner, 2019. "Who Pays for the Minimum Wage?," American Economic Review, American Economic Association, vol. 109(8), pages 2693-2727, August.
    2. Mayneris, Florian & Poncet, Sandra & Zhang, Tao, 2018. "Improving or disappearing: Firm-level adjustments to minimum wages in China," Journal of Development Economics, Elsevier, vol. 135(C), pages 20-42.
    3. Andrea Garnero, 2018. "The dog that barks doesn’t bite: coverage and compliance of sectoral minimum wages in Italy," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 7(1), pages 1-24, December.
    4. Isaac Marcelin & Daniel Brink & David Oluwatosin Fadiran & Hammed Adedeji Amusa, 2019. "Subsidized labour and firms: Investment, profitability, and leverage," WIDER Working Paper Series wp-2019-50, World Institute for Development Economic Research (UNU-WIDER).
    5. Raffaella Sadun, 2015. "Does Planning Regulation Protect Independent Retailers?," The Review of Economics and Statistics, MIT Press, vol. 97(5), pages 983-1001, December.
    6. Katalin Bodnár & Ludmila Fadejeva & Stefania Iordache & Liina Malk & Desislava Paskaleva & Jurga Pesliakaitė & Nataša Todorović Jemec & Peter Tóth & Robert Wyszyński, 2018. "How do firms adjust to rises in the minimum wage? Survey evidence from Central and Eastern Europe," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 7(1), pages 1-30, December.
    7. Ilona Babenko & Viktar Fedaseyeu & Song Zhang, 2017. "Executives In Politics," BAFFI CAREFIN Working Papers 1762, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    8. George Vachadze, 2021. "Financial development, income and income inequality," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 16(3), pages 589-628, July.
    9. Koch, Andreas & Kirchmann, Andrea & Reiner, Marcel & Scheu, Tobias & Boockmann, Bernhard & Bonin, Holger, 2018. "Verhaltensmuster von Betrieben und Beschäftigten im Zuge der Einführung des gesetzlichen Mindestlohns," IZA Research Reports 84, Institute of Labor Economics (IZA).
    10. Andrea Bassanini, 2012. "Aggregate Earnings and Macroeconomic Shocks: the Role of Labour Market Policies and Institutions," Review of Economics and Institutions, Università di Perugia, vol. 3(3).
    11. Bossler, Mario & Gürtzgen, Nicole & Lochner, Benjamin & Betzl, Ute & Feist, Lisa, 2018. "The German minimum wage: Effects on business expectations, profitability, and investments," FAU Discussion Papers in Economics 13/2018, Friedrich-Alexander University Erlangen-Nuremberg, Institute for Economics.
    12. Tony Fang & Morley Gunderson & Carl Lin, 2021. "The impact of minimum wages on wages, wage spillovers, and employment in China: Evidence from longitudinal individual‐level data," Review of Development Economics, Wiley Blackwell, vol. 25(2), pages 854-877, May.
    13. Pestel, Nico & Bonin, Holger & Isphording, Ingo E. & Gregory, Terry & Caliendo, Marco, 2020. "Auswirkungen des gesetzlichen Mindestlohns auf Beschäftigung und Arbeitslosigkeit," IZA Research Reports 95, Institute of Labor Economics (IZA).
    14. Dami'an Vergara, 2022. "Minimum Wages and Optimal Redistribution," Papers 2202.00839, arXiv.org, revised Dec 2022.
    15. Mirko Draca & Stephen Machin & John Van Reenen, 2011. "Minimum Wages and Firm Profitability," American Economic Journal: Applied Economics, American Economic Association, vol. 3(1), pages 129-151, January.
    16. Young Cheol Jung & Adian McFarlane & Anupam Das, 2021. "The effect of minimum wages on consumption in Canada," The Economic and Labour Relations Review, , vol. 32(1), pages 65-89, March.
    17. Hase, Carl, 2023. "Minimum Wage Pass-through to Wholesale and Retail Prices: Evidence from the Washington State Cannabis Industry," VfS Annual Conference 2023 (Regensburg): Growth and the "sociale Frage" 277644, Verein für Socialpolitik / German Economic Association.
    18. Hamid Beladi & Chen Cheng & May Hu & Yuan Yuan, 2020. "Unemployment governance, labour cost and earnings management: Evidence from China," The World Economy, Wiley Blackwell, vol. 43(10), pages 2526-2548, October.
    19. Zhao, Yueyang & Mao, Jinzhou, 2022. "Energy effects of non-energy policies: Minimum wage standard and enterprise energy efficiency in China," Resources Policy, Elsevier, vol. 79(C).
    20. Joachim Möller, 2012. "Minimum wages in German industries—what does the evidence tell us so far? [Branchenspezifische Mindestlöhne in Deutschland – Was sagt uns die empirische Forschung?]," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 45(3), pages 187-199, December.

    More about this item

    Keywords

    minimum wage; profitability;

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nse:doctra:g2016-09. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: INSEE (email available below). General contact details of provider: https://edirc.repec.org/data/inseefr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.