MINIMUM WAGE EFFECT ON EMPLOYMENT

The study examines a link between the minimum wage and employment by observing a Lithuanian minimum wage increase in 2013. A difference-in-differences estimation is used to evaluate the effects. The paper applies “at-risk” methodology where the treatment group is defined as individuals earning below the upcoming minimum wage and the control group is the individuals earning slightly above the new minimum wage. In line with the main theories, the results revealed that the minimum wage reform in 2013 has reduced the probability of remaining employed for the minimum wage earners by 4.5-5%. The study also found an indication that the increase of the minimum wage positively affected minimum wage earners’ probability of changing from full-time to part-time employment. No effect was observed on working hours and unemployment duration.