Publication
Minimum wages and worker retention
| Summary: | How are incumbent workers impacted by minimum wage increases? Is labour market concentration an important moderating factor? We address these questions by presenting a new model, drawing on comprehensive employer-employee matched panel data from Portugal, and considering individual mandated wage rises from both national and collectively bargained minimum wages. We find that employment protection plays a key role in these effects: workers under permanent contracts are almost completely insulated from the exit hazards associated with ‘wage bites’ while workers in temporary (fixed-term) contracts are exposed to these hazards. Labour concentration can significantly reduce negative effects on temporary workers, by up to 60%. A model of monopsonistic competition with firing costs rationalises these patterns. |
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| Main Authors: | Snell, Andy |
| Other Authors: | Almeida, Enzo; Martins, Pedro Silva; Thomas, Jonathan P. |
| Subject: | minimum wages Collective bargaining Temporary contracts Labour market power SDG 8 - Decent Work and Economic Growth |
| Year: | 2026 |
| Country: | Portugal |
| Document type: | working paper |
| Access type: | open access |
| Associated institution: | Universidade Nova de Lisboa |
| Language: | English |
| Origin: | Repositório Institucional da UNL |
| Summary: | How are incumbent workers impacted by minimum wage increases? Is labour market concentration an important moderating factor? We address these questions by presenting a new model, drawing on comprehensive employer-employee matched panel data from Portugal, and considering individual mandated wage rises from both national and collectively bargained minimum wages. We find that employment protection plays a key role in these effects: workers under permanent contracts are almost completely insulated from the exit hazards associated with ‘wage bites’ while workers in temporary (fixed-term) contracts are exposed to these hazards. Labour concentration can significantly reduce negative effects on temporary workers, by up to 60%. A model of monopsonistic competition with firing costs rationalises these patterns. |
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