The Minimum Wage: Labor Market Consequences in the Czech Republic

This paper aims to quantify the impact of the minimum wage on labor market performance in the Czech Republic. Using regional data for 1995-2004, it estimates the effect of the minimum wage adjusted for the regional wage differential on regional unemployment. Consequently, using detailed individual data from 2004/2005, we analyze the annual hikes in the minimum wage, which allow us to estimate employment probabilities for workers with a wage level at, or close to, the new minimum wage. The aim is to reveal whether the most endangered groups of workers exhibited significantly different subsequent employment probabilities. Our results reveal that the minimum wage has had a significant impact in terms of increasing regional unemployment and reducing the employment probabilities of low-paid workers.