Comments on S. Machin
UK minimum wage and the Low
Pay Commission
Marco Leonardi
Frdb Conference
Rome, April 21st, 2015
Main criticism: MW may cause
unemployment
1) International evidence:
In US and UK does not cause unemployment
2) Cautionary period:
Initial caution period and exemptions for apprentices
and young workers (in Germany also for some sectors)
3) Independent commission:
Sensitive to unemployment. In Italy could also be set by
unions and employers’ associations and then applied
by law
MW would not raise
unemployment
• In Italy, there is no minimum wage legislation. However, through
Article 36 of the Constitution, judges can (and usually do), if
required, refer to the minimum wage standards agreed in national
collective agreements as the minimum wage to be applied.
• Ie. minimum wages set at lower levels than collective agreements
would lower wages instead of raising them. Downward wage
pressure
• There is no risk of creating unemployment but MN would still
change radically industrial relations system
The effects of MW
How many workers are covered by
CCNL?
The trade off is: if the current system leaves too many
uncovered then MW would make enforcement of the
minimum easier.
Instead of going to the judge to have the wage set in the
national collective agreement enforced, you can send an
inspector to enforce the minimum wage
In the UK is HM revenues and customs (Agenzia delle Entrate)
which does the control
How many are covered? SES
I minimi contrattuali in Italia
salario minimo indice di
contrattuale Kaitz (*)
a
b- e
f
g
h
i
j
k
l- n
o
p
q
r- u
agricoltura, silvicoltura, pesca
industria in s.s.
costruzioni
commercio
trasporto e magazzinaggio
alloggio e ristorazione
informazioni e comunicazioni
att.finanziarie e assicurative
att.immobiliari, professionali, noleggio
PA
istruzione
sanità e assistenza sociale
att.artistiche, sociali, altri servizi
8,4
9,6
11,8
9,3
11,0
9,3
9,9
14,5
9,2
13,3
14,7
9,9
8,6
-0,73
0,93
0,79
0,80
0,98
0,59
0,66
0,67
-0,66
0,60
0,81
(*) salario medio tratto da indagine SES (Structural Earnings Survey, Eurostat, 2010)
lavoratori
non coperti
(%)
-9,8
36,9
13,9
11,9
29,4
5,9
13,4
15,9
-23,5
8,3
27,7
Inequality reduction. INPS data
110
100
90
80
1993
1996
1999
99th
2002
year
2005
50th
2008
1st
2011
Inequality reduction
2.5
2.3
2.1
1.9
1.7
1.5
1993
1996
Effettivo
1999
2002
year
2005
MW=40%med93
2008
2011
MW=60%med93
Who are the uncovered workers
• 4% earn less than 5 euro/hour (200 per week)
8% less than 7euro/hour (280 per week)
• 33% of p1 workers in firm size below 10
(wrt. 18% of p10 )
• 44% of p1 workers in retail and services
(wrt. 28% of p10 )
• 35% of p1 workers are younger than 30
(wrt. 22% of p10 )
Conclusions
• NO MW: If objective is to decentralize wage
bargaining within employers and employees
associations we only need new laws to
measure union votes and fiscal incentives for
2nd level bargaining. But decentralized
bargaining may still be low in small firms and
many workers may still be not covered by
CCNL.
Conclusions
• MW for all: If objective is to reduce inequality
and cover all workers more easily (although
not perfectly because of hours and black
economy). Setting new MW as benchmark
instead of CCNL may induce more downward
wage pressure (together with CTC) and exits
from employers’ associations. In other
countries there is no evidence of bunching at
MW though.