Currently, 22 of the 28 EU counties adopt a statutory wage floor in order to regulate industrial relations and provide a decent standard of living. Minimum wages were increased at the start of 2019 in most EU countries, with a median increase of 4.8 % compared with the previous year (WSI Minimum Wage Report 2019).
In Italy, in contrast, minima are determined on a sector-specific base through collective bargaining between social partners. This different approach is due to the crucial role played by traditional labour organizations and trade unions in the Italian framework.
While a growing debate on a European minimum wage policy is taking place, we aim to assess if a national minimum wage could represent an effective instrument to deal with residual income inequality in Italy.
The idea is to create different scenarios for the simulation, varying the introduction level of the floor (a broad economic literature suggests a minimum level of 60% of median income as an effective tool to face with poverty and inequality), assuming the presence or the lack of employment effect following the simulated measure, analyzing the firms reaction and finally looking at the variation of the income distribution.
A negative effect of the minimum wage in terms of growing unemployment could sterilize the compression of the distribution due to the introduction of the floor.
Nevertheless, following a rich literature started from Card and Krueger (1994), also assuming negligible unemployment effects appears a plausible scenario.
In the light of our results, we try to determine if minimum wage, and at which level, can be considered as an effective measure in order to reduce inequality and promote fair remuneration of workers.
First of all, this research differs from the prevailing economic literature on the minimum wage because it is not intended to assess the effects on employment but rather to use the latter only in an instrumental way to arrive at an assessment of what is the effect in terms of reducing wage inequality.
For the reasons we have expressed above, it is essential to try to carry out an analysis of the behaviour of enterprises because the increase in labour costs leads to problems of competitiveness and productivity. In fact, it is not unreasonable to assume that they can reduce the number of hours worked or the level of employment as a result of the introduction of a minimum wage.
These possible effects on employment may partly offset the decline in income distribution due to the introduction of the minimum wage, and therefore cannot be omitted from the analysis.
The economic literature on the minimum wage, on the other hand, has focused mainly on assessing the effects on unemployment, but it is now clear that the effects of social equity must also be scientifically investigated. Our study must be read in this light.
Another innovation element of the project relates to the general conditions under which the analysis is carried out. In general, ex-post studies are carried out in countries where the minimum wage has already been legally adopted and their effects are assessed after a certain period of time.
In our case, instead, we place ourselves in an ex-ante perspective, in which proposing different scenarios of evaluation, we try to understand what could happen in terms of social equity if the minimum wage was introduced in Italy.
Moreover, this project also aims to be a further contribution to assessing possible developments in industrial relations in our country.
It's worth noting that In our view, the minimum wage is not an alternative to collective bargaining, but rather a complementary measure. In fact, the minimum wage level in a given sector is not the only element of discussion between the social partners in the negotiations, but other labour relations issues are the subject of bargaining between trade unions and employers' representative organisations.
At a historic time when the debate on minimum wages is taking place both in Italy and in Europe, this type of analysis is undoubtedly timely and necessary.