The politics of the minimum wage: Explaining introduction and levels

Abstract

There is much economics research on the effects ofminimum wages, but little research on their poli-tics. Yet, ever more advanced capitalist democracieshave introduced minimum wages, and the setting ofminimum wage levels has become increasingly politi-cized. This article is the first comprehensive study of thepolitics of the minimum wage: We analyse the deter-minants of adopting minimum wages as well as whatexplains variation in their levels over time, based ona dataset of 33 OECD countries from 1960 to 2017. Wefind that the decline in collective bargaining is themain driving force behind the introduction of ever moreminimum wages. At the same time, left-wing parties ingovernment are most likely to adopt a minimum wagewhen bargaining coverage is low. Left governments arealso associated with higher minimum wages, especiallywhen the government has full control over level-setting