The approach of EU governments towards minimum wages started to change from the turn of the century and national minimum wages have risen sharply, particularly since the mid-2010s, becoming more binding and shaping wage dynamics more broadly. Drawing on recent Eurofound research, this policy brief examines how national minimum wage increases may affect employees’ pay levels, wage inequality, collective bargaining and the wider employment structure. Findings show sizeable knock-on effects along the wage distribution, a compression of wage inequality at the bottom (especially following large hikes in national minimum wages), a narrowing gap with collectively agreed wage floors, and an association with a shift towards higher-paid jobs in the employment structure. However, a national minimum wage should not be seen as a standalone solution to poverty or broader inequalities, while its possible disemployment effects also need to be considered.
