Increase in minimum wages has less effect on employment than expected NOW

An increase in the minimum wage has less effect on employment than previously thought. The Netherlands Bureau for Economic Policy Analysis (CPB) comes to this conclusion based on new insights from international literature, the government’s economic research institute reports Thursday.

According to the CPB, in previous studies they have mainly mistaken for a decrease in the demand for labor when the price of it, wages, is increased. The institute further says that releasing the link between minimum wages and benefits will further reduce the effect of an increase.

If the minimum wage is increased by 5 percent, according to the CPB this will lead to a decrease in employment by approximately eighteen thousand jobs. “As the minimum wage increases further, the number of jobs lost will increase more than proportionally.”

For example, if the legal minimum were to increase by 40 percent, employment would fall by more than 300,000, according to the CPB.

If the link with benefits is released, the effect on employment will decrease considerably. With an increase of 5 percent, hardly any jobs will be lost. With an increase of 40 percent, that number will be reduced to around 180,000 jobs. “An increase in benefits will make work less attractive,” CPB explains.


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