Local factors affecting the fair minimum wage

Abstract

The purpose of the article is to present the method of estimating the amount of a fair minimum wage, one which takes into account both the cost of living and labour productivity in the economy. The first part of the paper presents a discussion on the issue of the minimum wage as a unique institution on the labour market. In particular, the potential positive and negative socio-economic effects of the establishment and growth of the minimum wage are described. The methodological part of the paper presents a model of the minimum wage that takes into account the needs of both parties in the employment relationship. This model is dependent on the level of the costs of living and local labour productivity. Additionally, the research hypothesis assumes that in regions with lower labour productivity a higher percentage of employees receive the minimum wage. The last empirical section is the case study involving the application of the developed minimum wage model for the provision of the outline of regionalisation of the minimum wage system in Poland. For this purpose, based on data from the Statistics Poland for 2016, the model amount of a minimum wage in each voivodeship has been calculated. Additionally, verifying the adopted hypothesis, a relationship between regional labour productivity and the percentage of persons receiving a minimum wage has been analysed. A correlation index of -0.487 has been achieved. The index may confirm that in regions with lower labour productivity a minimum wage constitutes a greater burden for an employer, which results in the necessity to shift some of such burdens to employees. The above observation, together with the fact of significant differentiation of labour productivity in voivodeships, speaks for the legitimacy of regionalisation of the minimum wage system in Poland.