A European Minimum Wage: Implications for Poverty and Macroeconomic Imbalances

By Enrica Detragiache, Christian H Ebeke, La-Bhus Fah Jirasavetakul, Koralai Kirabaeva, Davide Malacrino, Florian Misch, Hyun Park, Yu Shi

May 22, 2020

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Enrica Detragiache, Christian H Ebeke, La-Bhus Fah Jirasavetakul, Koralai Kirabaeva, Davide Malacrino, Florian Misch, Hyun Park, and Yu Shi. A European Minimum Wage: Implications for Poverty and Macroeconomic Imbalances, (USA: International Monetary Fund, 2020) accessed November 8, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

A hypothetical European Minimum Wage (MW) set at 60 percent of each country’s median wage would reduce in-work poverty but have limited effects on overall poverty, as many poor households do not earn a wage near MW and higher unemployment, higher prices, and a loss of social insurance benefits may erode direct benefits. Turning to competitiveness, since the MW increase to reach the European standard would be larger in euro area countries with excessive external surpluses, the associated real appreciation should help curb existing imbalances. However, a few countries with already weak external positions would experience an undesirable real appreciation.

Subject: Labor, Labor costs, Minimum wages, Poverty, Wage adjustments, Wages

Keywords: Baltics, Central and Eastern Europe, Current account, Current Account Rebalancing, Europe, European Union, Global, IMF staff calculation, Influence wage dynamics, Labor costs, Minimum Wage, Minimum wages, Monetary Unions, MW harmonization, Poverty Alleviation, Pressure mechanism, Wage adjustments, Wage competitiveness, Wage differentiation, Wage distribution, Wage growth, Wage inequality, Wage-inflation pass-through, Wages, Workers range, WP

Publication Details

Pages:

46
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2020/059
Stock No:

WPIEA2020059
ISBN:

9781513545073
ISSN:

1018-5941

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