Minimum-Wage Increases and Employment: Empirical Evidence from the Czech and Slovak Republics

Minimum wages were raised considerably in the Czech and Slovak Republic from 1999 to 2001. Using information from matched employee-employer data sets, we looked at the impact of minimum- wage hikes on both wages and employment. Our results suggest that although there was no evidence of substantial job loss given the minimum-wage hikes, the impact on firms’ wages was rather significant, implying that a wage increase of a similar magnitude could well have a negative effect on employment, especially in smaller firms operating in competitive markets.