Minimum wage violation in central and eastern Europe 299
lyse both the incidence of minimum wage violations and their monetary depth,
and describes our data set. In the third section, we present our estimates of
the violation measures over the period 2003 –2012, the individual- and the
rm-level correlates of non-compliance estimated with probit models, and the
results of panel regressions at the country level. The fourth section presents
policy experiences and discusses the institutional features of CEE countries
that may have contributed to the patterns of non-compliance that we identify.
In the last section, we summarize our ndings and discuss the policy implica-
tions of our results.
Minimum wages in central and eastern Europe
In 2015, of the 28 EU Member States, 22 had statutory national minimum
wages. Eleven of these countries were CEE countries that joined the EU in
2004 or later: Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Lat-
via, Lithuania, Poland, Romania, Slovakia and Slovenia. This is the group of
countries that we focus on in this article.3 For reasons of data availability,
we have chosen to exclude Croatia. We refer to the remaining group as the
CEE-10 countries. The EU countries without a national minimum wage had
minimum wages at the industry (Austria, Denmark, Finland and Italy) or oc-
cupational (Cyprus) levels, usually as a result of collective bargaining. Such
procedures were not followed by any of the CEE-10 countries. The minimum
wage arrangements in these countries are summarized in table 1.
A common feature of minimum wage systems in the CEE-10 countries is
that they cover all workers in wage employment under a single, widely known,
national minimum wage.4 In all of the CEE-10 countries the minimum wage
was set at a monthly rate, although an hourly rate was also explicitly speci-
ed in several countries. Poland, Slovakia and the Czech Republic (until 2012)
had sub-minimum wage levels for young workers or labour market entrants.
The Czech Republic, Hungary and Slovakia set higher minimum wage levels
3 According to Eurostat, the other EU countries with statutory national minimum wages
in 2015 were Belgium, France, Germany, Greece, Ireland, Luxembourg, Malta, the Netherlands,
Portugal, Spain and the United Kingdom. The national minimum wage was introduced in Ger-
many on 1 January 2015.
4 The self-employed are not covered by a minimum wage in any of the CEE-10 countries.
This can be an issue in cases of bogus self-employment. Although such employment represents
a broader form of non-compliance with labour regulations, it may to some extent be driven
by a desire to circumvent minimum wage laws. In Poland, for instance, the minimum wage is
not binding for civil law contracts (a type of temporary contract). However, the use of such
contracts is prohibited if a worker is economically dependent on a company. Thus, contracting
an employee using a civil law contract can be interpreted as a violation of labour regulations
and as a deliberate violation of minimum wage laws if the worker earns less than the equiva-
lent of a monthly minimum wage. In practice, it is impossible to distinguish civil law contracts
from other temporary contracts in available survey data as they are clustered together as tem-
porary contracts in the EU Labour Force Survey (EU-LFS) and EU Statistics on Income and
Living Conditions (EU-SILC) databases, and are not covered by EU Structure of Earnings