Influence of minimum wage on labour market – case of Slovak Republic

For the health of whole economy it is important for the labour market to follow progressive trend – either by increase of work productivity or employment. Work productivity is an instrument that should be managed by employers directly. However employment is an indicator very important in policy decision making process, because it can be influenced by policy tools binding in code of laws. It appears, that one of the policy tools preventing unemployment rate to drop is minimum wage institute that influences labour market significantly. Minimum wage in Slovakia is given in “law of minimum wage” under the auspices of Ministry of Labour, Social Affairs and Family. It says (Law from year 2007) that minimum wage changes annually according to the agreement among social partners. To quantify the influence of minimum wage institute on labour market, we used econometric modelling (ARMA structure, Granger causality) that confirmed relation between structured employment and minimum wage according to our expectations. We studied this relation on time series on quarterly data (1994Q1-2010Q4). The influence of minimum wage in Slovakia is apparent mainly in the branches characterized by lower gross wage than average in the whole economy (KZAM 4, 6, 7, 8, 9) with exception of the first occupational group. Structurally in those branches work more than half of all employees, which is one of the reasons why knowing relation between given policy tool and labour marked is crucial for policy decision making. See above See above