Long-Term Responses to Large Minimum Wage Shocks: Sub-Minimum and Super-Minimum Workers in Slovenia

39 Pages Posted: 21 May 2019

See all articles by Suzana Laporsek

Suzana Laporsek

University of Primorska

Peter F. Orazem

Iowa State University and IZA; IZA Institute of Labor Economics

Matija Vodopivec

Bank of Slovenia

Milan Vodopivec

University of Primorska

Date Written: January 2019

Abstract

This study examines long-term effects of a minimum wage increase using an innovative identification strategy based on categorising workers according to their predicted marginal revenue products. It finds that the increase had a large and persistent disemployment effects on low-paid workers and that it triggered substitution toward more productive workers. As a consequence, the sub-minimum workers as a group lost average earnings, hours and employment compared to other workers. The adverse employment effect occurred both through a higher probability of transition from employment to non-employment and through a decreased probability of transition from non-employment to employment.

Keywords: minimum wage, employment, unemployment, hours, earnings, Slovenia

JEL Classification: J38, J31

Suggested Citation

Laporsek, Suzana and Orazem, Peter Francis and Vodopivec, Matija and Vodopivec, Milan, Long-Term Responses to Large Minimum Wage Shocks: Sub-Minimum and Super-Minimum Workers in Slovenia (January 2019). IZA Discussion Paper No. 12123. Available at SSRN: https://ssrn.com/abstract=3390110

Suzana Laporsek (Contact Author)

University of Primorska ( email )

Cankarjeva 5
Koper, SI-6000
Slovenia

Peter Francis Orazem

Iowa State University and IZA ( email )

260 Heady Hall
Ames, IA 50011
United States
515-294-8656/515-294-7740 (Phone)
515-294-0221 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Matija Vodopivec

Bank of Slovenia ( email )

Slovenska cesta 35
Ljubljana, 1505
Slovenia

Milan Vodopivec

University of Primorska

Cankarjeva 5
Koper, SI-6000
Slovenia

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