Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/236487 
Year of Publication: 
2021
Series/Report no.: 
IZA Discussion Papers No. 14456
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
Turning a "blind eye" to non-compliance with minimum wage standards is sometimes presented as a pragmatic way to accommodate higher wages while not harming employment opportunities for workers employed in marginal firms. In this paper, we model firms' wage and employment decisions, and show that there may be a trade-off between non-compliance and employment. The main prediction of the model are empirically tested using data from the Italian labour force survey. We find evidence of a positive employment non-compliance effect, though elasticities are smaller than typically thought as employers internalize the expected costs of non-compliance. We also show that employment effects are larger at low levels of non-compliance (when the risk of being referred to court is very low). The implications for policy and the role of regulators in monitoring and sanctioning non-compliance are discussed.
Subjects: 
collective bargaining
sectoral minimum wages
compliance
Document Type: 
Working Paper

Files in This Item:
File
Size
999.16 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.