The project has achieved considerable success in understanding the impact of minimum wages on employment wages, and inequality. I have explored the impact of major minimum wage changes in Europe. Identifying the effect of these policies have first-order empirical relevance as policymakers need to understand whether minimum wages can elevate wages without substantially harming low-wage workers’ employment prospects. Studying the impact of minimum wages in the European context is particularly challenging as most member states lack within-country variation and so all low-wage workers are affected by the policy. Therefore, I developed a novel methodology to study the impact of minimum hikes in the context where there are no within country variating in the level of minimum wages. In the United Kingdom, we find no indication of any significant disemployment effects, while minimum wages increased considerably family income at the bottom of half of the income distribution. In Germany, I have documented that the introduction of the minimum wage was a great success. It increased wages without any discernible effect on employment and also increased productivity by reallocating workers from less to more productive firms.
I also studied the impact of city-wide minimum wages. More and more cities have city-level minimum wages in the United States, and only limited research has been devoted to understanding the implication of those policies. I find that the impact of the policy on wages and employment to date has been broadly similar to the evidence on state- and federal-level minimum wage changes. Overall, city-level minimum wages seem to be able to tailor the policy to the local economic environment without imposing substantial distortions in the allocation of labor and businesses across locations. In the U.S. context, I also developed a novel empirical strategy to study the impact of minimum wages on overall employment and not just some particular groups like teens. This has first-order importance as the policymakers often care about the overall impact of the policy, but most estimates are on specific groups like teens. The new approach that I developed combines modern machine-learning techniques with traditional empirical approaches.
The funding also allowed me to explore the relationship between technological change and inequality by exploiting novel data and new empirical strategies. We find that technological change is still skill-biased in Hungary and Norway and so they contribute to increased inequality. Therefore, institutions like minimum wages still play a major role to counteract the implications of technological progress. My research also implies that pension reforms can substantially affect labor supply decisions and can contribute to raising inequality in many countries.
