Title: Minimum wage as the determinant of productivity in EU countries

Authors: Jana Kopecká; Lenka Viskotová; David Hampel

Addresses: Department of Statistics and Operation Analysis, Mendel University in Brno, Zemědělská 1, 61300 Brno, Czech Republic ' Department of Statistics and Operation Analysis, Mendel University in Brno, Zemědělská 1, 61300 Brno, Czech Republic ' Department of Statistics and Operation Analysis, Mendel University in Brno, Zemědělská 1, 61300 Brno, Czech Republic

Abstract: When introducing and setting minimum wages, primarily to reduce poverty and avoid undesirable phenomena in the labour market, it is necessary to monitor the impact on various aspects of the real economy. This paper focuses on demonstrating the positive impact of nominal minimum wage growth on productivity in EU countries. A cluster analysis is used to divide countries into two distinguished clusters. Using panel regression, the effect of a minimum wage is found to be significant and positive. To rule out spurious regressions and to demonstrate the robustness of the performed analyses, appropriate covariates are included in the models, different forms of productivity are modelled, and the models are also estimated independently for each cluster.

Keywords: cluster analysis; company production process; EU27; human capital; labour costs; low-wage employees; minimum wage; productivity of labour; panel regression model; training of employees.

DOI: 10.1504/IJCEE.2025.145003

International Journal of Computational Economics and Econometrics, 2025 Vol.15 No.1/2, pp.3 - 17

Received: 25 May 2023
Accepted: 20 Jan 2024
Published online: 17 Mar 2025 *