Did minimum wage increases reduce employment? Panel data evidence from Romania

Rising minimum wages is a popular policy used to increase the income of low wage workers, reduce inequalities and improve labour market participation. However, there are concerns among policy makers about its possible negative effects on employment. This paper examines the effect of minimum wage increases on regional employment, using a panel of 42 NUTS III regions from Romania over a recent period, 2008-2014, which includes the economic crisis and the recovery. The results show that, on average, increases in minimum wages had an insignificant effect on employment during the period studied. The results are robust to different specifications. They also highlight the importance of a strong manufacturing base for raising regional employment.