Minimum wages and the wage distribution in Estonia

Abstract: This article studies how changes in the statutory minimum wage have affected the wage distribution in Estonia, a post-transition country with little collective bargaining and relatively large wage inequality. The analyses show that the minimum wage has had substantial spillover effects on wages in the lower tail of the distribution; the effects are most pronounced up to the twentieth percentile and then decline markedly. The minimum wage has contributed to lower wage inequality and this has particularly benefitted low-wage segments of the labour market such as women and the elderly. Interestingly, the importance of the minimum wage for the wage distribution was smaller during the global financial crisis than before or after the crisis.