| Abstract [eng] |
The master’s thesis “Study of Methods for Determining the Minimum Monthly Wage” analyzes both theoretical and practical approaches to setting the minimum monthly wage and their impact on economic indicators in Lithuania. The aim of the thesis is to examine the methods of determining the minimum wage and assess their effects on employment, labor productivity, and price levels. To achieve this goal, the following tasks were set: to define the methods and criteria for determining the minimum wage, to evaluate its impact on employment, productivity, and prices, and to compare the consequences of alternative minimum wage-setting methods with the actual outcomes of Lithuania’s minimum monthly wage. The theoretical part of the thesis discusses economic schools of thought on the minimum wage, wage theories including subsistence, living wage, efficiency wage, and bargaining theories, and also analyzes the practice of setting minimum wages in Lithuania, Latvia, Estonia, the Netherlands, and Croatia. In the empirical part, an autoregressive distributed lag model and an error correction model are applied, allowing for the assessment of both short-term and long-term effects. The study simulates three different minimum wages, defined according to the literature as the target minimum wage: 100 proc. of the median income, 60 proc. of the median income, and a wage adjusted for tax effects. The effects of the simulated wages on selected economic indicators in Lithuania are evaluated. The simulations are performed using dynamic forecast-based counterfactual analysis supported by rolling regression techniques. The results of the study revealed that the minimum wage has a long-term positive effect on employment, but a short-term negative effect on labor productivity and a positive effect on price levels. It was observed that gradually increasing the minimum wage brings it closer to the living wage level of 60 proc. of the median income. The results indicate that 60 proc. of the median income would be an optimal choice for the Lithuanian economy, maintaining a balance between social equity and economic efficiency. The findings of this research can be published in academic journals covering labor market, social policy, and economic analysis topics, as well as presented at conferences or used to develop public policy recommendations. |
