Minimum wages and wage compression in Belgian industries

Measuring the effects minimum wages have on wage inequality and employment is complex, and troubled by endogeneity issues. We use a large longitudinal dataset and sectoral minimum wage variation to analyse trends in minimum wages and wage inequality in Belgium. Building on the model of Lee (1999) and the critique by Autor, Manning and Smith (2014), we find that minimum wage increases in Belgium cause a two-sided compression of the wage distribution. Using wage indexation as a natural instrument, we find an additional source of endogeneity in sectoral bargaining. It appears that unions and empl... Mehr ...