Tuesday 02 December 2025 12:00 - 13:00

SAL 2.04, 2nd Floor Conference Room, Sir Arthur Lewis Building, LSE, 32 Lincoln's Inn Fields, London WC2A 3PH

About this event

Permanent increases in the minimum wage compress the lower tail of the wage distribution, reducing cross-sectional current labor income inequality. While the effects on snapshot measures of inequality are well established, less is known about how the minimum wage shapes lifetime inequality, which better captures individuals’ disparities in resources. Using rich administrative employer-employee matched data from Portugal and exploiting a minimum wage reform consisting of a large and permanent increase in the national real minimum wage between 2007 and 2010, I estimate individual-level effects during the reform and their subsequent effects in the years that follow the reform (8 years after the start of the reform) for workers across the 2006 wage distribution. Although the effects remain persistent for a few years, they relatively quickly dissipate once the real minimum wage stops rising, with workers converging back toward what their lifecycle wage and earnings trajectories in the absence of the real minimum wage increase. The transitory effects of this permanent minimum wage increase arise from two key mechanisms: (1) substantial labor income mobility causes low-wage workers to grow out of minimum wage exposure over time, and (2) the reform generates minimal impact on determinants of future wages—no effects on hours or employment, and only modest firm reallocation toward more productive firms. As a result, the policy meaningfully reduces current income inequality but has more muted effects on lifetime inequality.

Participants are expected to adhere to the CEP Events Code of Conduct.

Directions

This event will take place in SAL 2.04, 2nd Floor Conference Room, Sir Arthur Lewis Building, LSE, 32 Lincoln's Inn Fields, London WC2A 3PH.

Labour Economics Workshops are part of the CEP's Labour Markets programme.