From small steps to stronger strides: examining the impact of minimum wage setting over the years

The approach of EU governments towards minimum wages started to change at the turn of the century. National minima have risen sharply, particularly since the mid-2010s, becoming more binding and shaping wage dynamics more broadly. Drawing on recent Eurofound research, this policy brief examines how national minima increases may affect employees’ pay levels, wage inequality, collective bargaining and the wider employment structure. Findings show sizeable knock-on effects along the wage distribution, a compression of wage inequality at the bottom (especially following large hikes in national minima), a narrowing gap with collectively agreed wage floors, and an association with a shift towards higher-paid jobs in the employment structure. However, national minima should not be seen as a standalone solution to poverty or broader inequalities. Possible disemployment effects also need to be considered.