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Minimum wage systems and earnings inequalities: Does institutional diversity matter?

Author

Listed:
  • Andrea Garnero
  • Stephan Kampelmann
  • François Rycx
Abstract
This article explores how the diversity of minimum wage systems affects earnings inequalities within European countries. It relies on the combination of harmonized microdata from household surveys, data on national statutory minimum wages and coverage rates and information on minimum rates compiled from more than 1100 sectoral-level agreements across Europe. The analysis covers 18 countries over the period 2007–2009. Empirical results confirm the intuition of many practitioners that the combination of sectoral minima and high collective bargaining coverage can be regarded as a functional equivalent of a binding statutory minimum wage, at least for earnings inequalities. Regression results suggest indeed that both a national statutory minimum and, in countries with sectoral minima, higher collective bargaining coverage is significantly associated with lower levels of (overall and inter-industry) wage inequalities and a smaller fraction of workers paid below prevailing minima. Several robustness checks confirm these findings.

Suggested Citation

  • Andrea Garnero & Stephan Kampelmann & François Rycx, 2015. "Minimum wage systems and earnings inequalities: Does institutional diversity matter?," ULB Institutional Repository 2013/205435, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:ulb:ulbeco:2013/205435
    Note: SCOPUS: ar.j
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    References listed on IDEAS

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    Cited by:

    1. Marianna Belloc & Paolo Naticchioni & Claudia Vittori, 2023. "Urban wage premia, cost of living, and collective bargaining," Journal of Economic Geography, Oxford University Press, vol. 23(1), pages 25-50.
    2. Andrea Garnero & Stephan Kampelmann & François Rycx, 2013. "Minimum Wage Systems and Earnings Inequalities: Does Institutional Diversity Matter?," Working Papers CEB 13-021, ULB -- Universite Libre de Bruxelles.
    3. Kevin Pineda‐Hernández & François Rycx & Mélanie Volral, 2022. "How collective bargaining shapes poverty: New evidence for developed countries," British Journal of Industrial Relations, London School of Economics, vol. 60(4), pages 895-928, December.
    4. Aysit Tansel & Başak Dalgıç & Aytekin Güven, 2019. "Wage Inequality and Wage Mobility in Turkey," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 142(1), pages 107-129, February.
    5. Maarten Keune, 2021. "Inequality between capital and labour and among wage-earners: the role of collective bargaining and trade unions," Transfer: European Review of Labour and Research, , vol. 27(1), pages 29-46, February.
    6. Maitre, Bertrand & McGuinness, Seamus & Redmond, Paul, 2017. "A study of minimum wage employment in Ireland: The role of worker, household and job characteristics," Research Series, Economic and Social Research Institute (ESRI), number BKMNEXT332.
    7. Monika Martišková & Marta Kahancová & Jakub Kostolný, 2021. "Negotiating wage (in)equality: changing union strategies in high-wage and low-wage sectors in Czechia and Slovakia," Transfer: European Review of Labour and Research, , vol. 27(1), pages 75-96, February.
    8. Otto Lenhart, 2017. "The impact of minimum wages on population health: evidence from 24 OECD countries," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 18(8), pages 1031-1039, November.
    9. Ms. Enrica Detragiache & Mr. Christian H Ebeke & La-Bhus Fah Jirasavetakul & Koralai Kirabaeva & Mr. Davide Malacrino & Florian Misch & Mr. Hyun Park & Ms. Yu Shi, 2020. "A European Minimum Wage: Implications for Poverty and Macroeconomic Imbalances," IMF Working Papers 2020/059, International Monetary Fund.
    10. Eva Militaru & Madalina Ecaterina Popescu & Amalia Cristescu & Maria Denisa Vasilescu, 2019. "Assessing Minimum Wage Policy Implications upon Income Inequalities. The Case of Romania," Sustainability, MDPI, vol. 11(9), pages 1-20, May.
    11. McGuinness, Seamus & Redmond, Paul, 2018. "Estimating the effect of an increase in the minimum wage on hours worked and employment in Ireland," Research Series, Economic and Social Research Institute (ESRI), number BKMNEXT354.
    12. Haapanala, Henri & Marx, Ive & Parolin, Zachary, 2022. "Decent Wage Floors in Europe: Does the Minimum Wage Directive Get It Right?," IZA Discussion Papers 15660, Institute of Labor Economics (IZA).
    13. Paul Redmond & Karina Doorley & Seamus McGuinness, 2021. "The impact of a minimum wage change on the distribution of wages and household income," Oxford Economic Papers, Oxford University Press, vol. 73(3), pages 1034-1056.
    14. Aimal Khan & Dr. Anwar Shah & Dr. Ghulam Mustafa, 2023. "Minimum Wage Compliance In Pakistan: A Demographic Analysis," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 12(3), pages 159-168.
    15. Salverda, Wiemer & Checchi, Daniele, 2014. "Labour-Market Institutions and the Dispersion of Wage Earnings," IZA Discussion Papers 8220, Institute of Labor Economics (IZA).
    16. Peng, Fei & Anwar, Sajid & Kang, Lili, 2017. "New technology and old institutions: An empirical analysis of the skill-biased demand for older workers in Europe," Economic Modelling, Elsevier, vol. 64(C), pages 1-19.
    17. Dr. Nickolaos Giovanis, 2018. "Determining Factors of Minimum Wage in the Member States of the OECD," Sumerianz Journal of Business Management and Marketing, Sumerianz Publication, vol. 1(4), pages 93-101, 12-2018.
    18. Anghel Ionuţ-Marian, 2017. "Measuring income inequality: comparative datasets and methodological deficiencies. An overview of income inequality in Romania during postsocialism," Social Change Review, Sciendo, vol. 15(1-2), pages 55-82, December.
    19. Ive Marx & Gerlinde Verbist, 2018. "Belgium, a poster child for inclusive growth?," Working Papers 1810, Herman Deleeck Centre for Social Policy, University of Antwerp.
    20. Redmond, Paul & Doorley, Karina & McGuinness, Seamus, 2019. "The impact of a change in the National Minimum Wage on the distribution of hourly wages and household income in Ireland," Research Series, Economic and Social Research Institute (ESRI), number RS86.
    21. Roberta MONTEBELLO & Jonathan SPITERI & Philip VON BROCKDORFF, 2023. "Trade unions and income inequality: Evidence from a panel of European countries," International Labour Review, International Labour Organization, vol. 162(3), pages 481-503, September.
    22. José M Arranz & Enrique Fernández-Macías & Carlos García-Serrano, 2021. "Wage differentials and segmentation: The impact of institutions and changing economic conditions," European Journal of Industrial Relations, , vol. 27(2), pages 203-227, June.
    23. Dr. Nickolaos Giovanis, 2019. "“Determining Factors of Minimum Wage in the Member States of the OECDâ€," Sumerianz Journal of Business Management and Marketing, Sumerianz Publication, vol. 2(1), pages 6-14, 01-2019.
    24. Kelly, Elish & McGuinness, Seamus, 2017. "A study of sub-minimum wage rates for young people," Research Series, Economic and Social Research Institute (ESRI), number BKMNEXT327.

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    More about this item

    Keywords

    Collective bargaining; Europe; minimum wage systems; wage inequality;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

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