The Economic Impact of Minimum Wage Increases on Entry-Level Employment. The Case for Romania

Debates on the impact of the minimum wage on the labor market are extensive and complex, highlighting both the potential for income growth and the risk of reducing opportunities for young, low- skilled or inexperienced workers. This article aims to analyze the impact of wage increases on entry-level employment, focusing on the number of employees aged 15-24. The specialized literature outlines this dichotomy between the benefits and challenges of raising the minimum wage, presenting mixed empirical evidence regarding its effects. One viewpoint is that increasing the minimum wage may have a positive effect on employment rates and productivity, in contrast, other research highlights the rising labor costs that discourage employers. This study employs quantitative data covering the period 2014-2023, sourced from National Institute of Statistics, Eurostat and the World Bank. The article applies a log-log regression model estimated using the ordinary least squares (OLS) method, with the dependent variable represented by the number of employed individuals in the 15-24 age group, serving as a proxy for entry-level employment. The independent variables include the youth unemployment rate, the minimum wage (RON), the inflation rate and GDP growth. The econometric model was implemented in Python, enabling the application of log-log regression and the examination of the relationship between minimum wage increases and youth employment. The study’s results suggest a negative elasticity between youth employment and minimum wage growth. Furthermore, the unemployment rate negatively affects youth employment, while inflation rate and GDP growth do not exhibit a statistically significant relationship with the dependent variable. This article contributes to the labor market literature, emphasizing the need to balance the pace of minimum wage increases with policies that support and integrate workers into entry-level positions.