A1518
Title: Minimum wage and inflation in European Union countries
Authors: Sylwia Roszkowska - Jagiellonian University (Poland)
Aleksandra Majchrowska - University of Lodz (Poland) [presenting]
Abstract: The purpose is to investigate the impact of minimum wage increases on inflation rates in European countries. The sample includes all EU countries with a national minimum wage. The research period is from 2003 to 2023, and the statistical data source is the Eurostat database. To verify the transmission effect of the minimum wage on prices, a minimum wage-augmented New-Keynesian Phillips curve is used. Dynamic panel models are employed. The results show that a minimum wage increase translates into higher inflation rates. The effects of increases in the minimum wage vary both over time and between countries, as well as within groups of primary products or services. Increases in the minimum wage are more significant in periods of high inflation. The minimum wage produces greater inflationary pressures in countries with strong labor markets and relatively high wages. Companies in these countries are able to transfer more of the increase in labor costs to consumers. The results are particularly relevant to labor market policy. They reveal that even if an increase in the minimum wage does not involve a decrease in employment, it can generate inflationary pressures.
