Education and Wage Inequalities under a Counterfactual Scenario of Minimum Wage

• Main Authors: Madalina Ecaterina Popescu, Eva Militaru
• Format: Article
• Language: English
• Published: Danubius University 2017-12-01
• Series: Acta Universitatis Danubius: Oeconomica
• Subjects: wage inequalities; minimum wage; counterfactual scenario; education; wage distribution
• Online Access: http://journals.univ-danubius.ro/index.php/oeconomica/article/view/4404/4327

The main purpose of this paper consists in quantifying the impact of a minimum wage adjustment upon wage inequality in Romania. In general, rigorous minimum wage impact assessment upon wage distribution is quite difficult to conduct mainly because of data access limitations to longitudinal information available at individuals‘ level. In this paper an innovative approach is proposed for building a counterfactual scenario through the use of quarterly survey micro-data provided by the National Institute of Statistics. The period analysed in this paper regards the timeinterval Q2 2014-Q3 2014. There are several reasons for this choice. First, it concerns data availability restrictions and second, the need to identify two consecutive periods corresponding to a window-frame right before a minimum wage adjustment and immediately after it took place. In order to check the impact on gender wage inequalities, a 1:1 matching procedure was applied for the construction of two distinct gender groups of individuals that were similar in observable characteristics. Both socio-demographic and economic factors are considered. When comparing the changes registered right after the minimum wage adjustment, we noticed a reduction in gender wage inequalities, as males‘ chances to earn more in comparison to females drop.