Generate QR code
Open Access
Subscription Access
Centralization and regionalization of minimum wages: Evidence from Russia
https://doi.org/10.32609/0042-8736-2023-1-86-104
Abstract
The paper investigates recent developments in the minimum wage policy in Russia. We focus on the effects of two interventions: (1) the decision of the Russian Constitutional Court of December 7, 2017 to exclude mandatory regional compensation payments and Northern allowances from the minimum wage; (2) the decision to equate the national minimum wage with the subsistence level through two hikes in early 2018. Our empirical analysis is based on the data for 2016Q1—2022Q1, covering the period before and after the interventions. The decision of the Constitutional Court introduced an additional tier of minimum wage setting. Formerly, minimum wages were regionalized in a decentralizedway via tripartite collective bargaining at the regional level. Since 2018, this approach has been supplemented with the centralized regionalization via mandatory regional coefficients. The decision to equate the minimum wage with the subsistence level also contributed to the increase in centralization as it reduced the room the social partners to set regional minima above the federal level. As a result, the regionalization via regional tripartite agreements has basically ceased to exist, although before 2018 it showed a decent ability to adapt to local conditions. Policy developments in 2017—2018 reduced the interregional variation in the bindingness and purchasingpower of minimum wages. However, it might have happened at the expense of economically weak regions. In poor regions, the ratio of the minimum wage to the average wage has exceeded 50%, which exacerbates the risks of disemployment and welfare losses in those regions.
Keywords
labor market institutions,
national minimum wage,
regional minimum wages,
regional tripartite agreements,
regionalization,
Northern coefficients,
regional disparities
JEL: J31, J38, J58, K31
References
1. Akulov V. B., Belevskikh T. V. (2013). On territorial wage differentiation. Problems of Territory’s Development, No. 6, pp. 57—65. (In Russian).
2. Vishnevskaya N. T. (2016). Regionalization of minimum wages. Public Administration Issues, No. 4, pp. 27—44. (In Russian).
3. Lishchuk E. N., Kapelyuk S. D. (2020). Problems of wage regulation in the Russian Far North and similar localities. Economy of Regions, Vol. 16, No. 1, pp. 97—113. (In Russian). https://doi.org/10.17059/2020-1-8
4. Lukiyanova A. L. (2016). Regional variation in the minimum wage policies in the Russian Federation (2007—2015). Public Administration Issues, No. 1, pp. 81—102. (In Russian).
5. Fauzer V. V. (2008). Theoretical and conceptual approaches to the development of the Russian North. Corporate Governance and Innovative Economic Development of the North: Bulletin of Research Center of Corporate Law, Management and Venture Investment of Syktyvkar State University, No. 4, рp. 90—120. (In Russian).
6. ILO (2020). Global wage report 2020—21: Wages and minimum wages in the time of COVID-19. International Labour Office. Geneva: International Labour Organization. Ahlfeldt G., Roth D., Seidel T. (2018). The regional effects of Germany’s national minimum wage. Economics Letters, Vol. 172, pp. 127—130. https://doi.org/10.1016/j.econlet.2018.08.032
7. Ahlfeldt G., Roth D., Seidel T. (2022). Optimal minimum wage. Centre for Economic Performance Discussion Paper, No. 1823.
8. Albinowski M., Lewandowski P. (2022). The heterogeneous regional effects of minimum wages in Poland. Economics of Transition and Institutional Change, Vol. 30, No. 2, pp. 237—267. https://doi.org/10.1111/ecot.12283
9. Dolton P., Bondibene C.R., Stops M. (2015). Identifying the employment effect of invoking and changing the minimum wage: A spatial analysis of the UK. Labour Economics, Vol. 37, pp. 54—76. https://doi.org/10.1016/j.labeco.2015.09.002
10. Flinn C. (2006). Minimum wage effects on labor market outcomes under search, matching, and endogenous contact rates. Econometrica, Vol. 74, No. 4, pp. 1013—1062. https://doi.org/10.1111/j.1468-0262.2006.00693.x
11. Lang K. (1987). Pareto improving minimum wage laws. Economic Inquiry, Vol. 25, No. 1, pp. 145—158. https://doi.org/10.1111/j.1465-7295.1987.tb00729.x
12. Lee D., Saez E. (2012). Optimal minimum wage policy in competitive labor markets. Journal of Public Economics, Vol. 96, No. 9—10, pp. 739—749. https://doi.org/10.1016/j.jpubeco.2012.06.001
13. Majchrowska A., Strawiński P. (2021). Minimum wage and local employment: A spatial panel approach. Regional Science Policy and Practice, Vol. 13, No. 5, pp. 1581—1602. https://doi.org/10.1111/rsp3.12471
14. Monras J. (2019). Minimum wages and spatial equilibrium: Theory and evidence. Journal of Labor Economics, Vol. 37, No. 3, pp. 853—904. https://doi.org/10.1086/702650
15. Oates W. E. (1972). Fiscal federalism. New York: Harcourt Brace Jovanovich. Rebitzer J., Taylor L. (1996). The consequences of minimum wage laws: Some new theoretical ideas. Journal of Public Economics, Vol. 56, No. 2, pp. 245—256. https:// doi.org/10.1016/0047-2727(93)01411-3
16. Simon A., Wilson M. (2021). Optimal minimum wage setting in a federal system. Journal of Urban Economic, Vol. 123, pp. 103—336. https://doi.org/10.1016/j.jue.2021.103336
17. van den Berg G. (2003). Multiple equilibria and minimum wages in labor markets with informational frictions and heterogeneous production technologies. International Economic Review, Vol. 44, No. 4, pp. 1337—1357. https://doi.org/10.1111/1468-2354.t01-1-00112
18. vom Berge P., Frings H. (2020). High-impact minimum wages and heterogeneous regions. Empirical Economics, Vol. 59, pp. 701—729. https://doi.org/10.1007/s00181-019-01661-0
Supplementary files
Review
For citations:
Lukyanova A.L. Centralization and regionalization of minimum wages: Evidence from Russia. Voprosy Ekonomiki. 2023;(1):86-104. (In Russ.) https://doi.org/10.32609/0042-8736-2023-1-86-104
Views:
775
Email this article 
