Management Theory and Studies for Rural Business and Infrastructure Development, Volume 38, Number 1

The linkages between mimumum wage and macroeconomic indicators in the European Union

Rimgailė Mačerinskaitė, Vytautas Kėdaitis, Tomas Baležentis

Abstract

The regulation of the minimum wage (MW) constitutes an important measure of state’s social and economic policy. The effectiveness of its implementation is highly dependent upon the socioeconomic situation. The research aims to identify the linkages and patterns of MW and macroeconomic indicators across the European Union (EU) Member States by the means of the multiple correspondence analysis. The following tasks are therefore set: 1) to describe the theoretical  preliminaries for MW regulation and their manifestations in the EU; 2) to establish a multiple correspondence analysis model for revealing the linkages between MW and macroeconomic indicators; 3) to identify the linkages between MW and macroeconomic indicators in the EU Member States. The research period spans over 2007–2013, thereby encompassing both economic recession and growth. Application of the multiple correspondence analysis showed that MW is strongly related to macroeconomic indicators of the EU Member States. These linkages remained rather stable throughout the research period thus indicating that the level of MW should be adjusted with regards to the overall economic situation. Otherwise, the regulation of MW might induce an increase in unemployment.

JEL Codes: J30, J38.

Keyword(s): minimum wage, European Union, correspondence analysis


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Management Theory and Studies for Rural Business and Infrastructure Development eISSN 2345-0355

This journal is published under the terms of the Creative Commons Attribution-Noncommercial 3.0 Unported License. Responsible editor: Dr Audrius Gargasas.