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Long-Term Responses to Large Minimum Wage Shocks: Sub-Minimum and Super-Minimum Workers in Slovenia

Author

Listed:
  • Laporsek, Suzana

    (University of Primorska)

  • Orazem, Peter F.

    (Iowa State University)

  • Vodopivec, Matija

    (University of Primorska)

  • Vodopivec, Milan

    (University of Primorska)

Abstract

This study examines long-term effects of a minimum wage increase using an innovative identification strategy based on categorising workers according to their predicted marginal revenue products. It finds that the increase had a large and persistent disemployment effects on low-paid workers and that it triggered substitution toward more productive workers. As a consequence, the sub-minimum workers as a group lost average earnings, hours and employment compared to other workers. The adverse employment effect occurred both through a higher probability of transition from employment to non-employment and through a decreased probability of transition from non-employment to employment.

Suggested Citation

  • Laporsek, Suzana & Orazem, Peter F. & Vodopivec, Matija & Vodopivec, Milan, 2019. "Long-Term Responses to Large Minimum Wage Shocks: Sub-Minimum and Super-Minimum Workers in Slovenia," IZA Discussion Papers 12123, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp12123
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    Cited by:

    1. Winters, John V., 2022. "Minimum Wages and Restaurant Employment for Teens and Adults in Metropolitan and Non-metropolitan Areas," IZA Discussion Papers 15499, Institute of Labor Economics (IZA).
    2. Laporšek, Suzana & Orazem, Peter F. & Vodopivec, Milan & Vodopivec, Matija, 2021. "Winners and losers after 25 years of transition: Decreasing wage inequality in Slovenia," Economic Systems, Elsevier, vol. 45(2).

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    More about this item

    Keywords

    minimum wage; employment; unemployment; hours; earnings; Slovenia;
    All these keywords.

    JEL classification:

    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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