Turning a ‘Blind Eye’? Compliance with Minimum Wage Standards and Employment

Bibliographic Data

ID9724547
AuthorsAndrea Garnero (0000-0002-2586-0475, European Commission, Joint Research Center OECD, Université libre de Bruxelles and IZA, corresponding author), Claudio Lucifora (0000-0001-6352-1709, Università Cattolica del Sacro Cuore and IZA)
Year2022
Volume89
Issue356
Pages884-907
Publication date2022-10-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueEconomica (JOURNAL)
Journal identifiersISSN: 0013-0427 • E-ISSN: 1468-0335
PublisherWiley (PUBLISHER • GB)
DOI10.1111/ecca.12421
OpenAlexW4220856803
LanguageEN
Citations received5
References cited32

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 predictions of the model are tested empirically 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

Business · Compliance (psychology) · Economics · Labour economics · Wage · Labor market dynamics and wage inequality · Labor Movements and Unions · Psychology · Taxation and Compliance Studies

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