The impact of the minimum wage on employment. The case of Albania - Economicus

By, Dr. Leonard BODURI, BA. Bora ALIMERI, PhD(c) Emirgena Nikolli

Abstract

Purpose: This paper examines the impact of minimum wage adjustments on wages and employment dynamics in Albania. Utilizing the standard competitive model, an escalation in the minimum wage is anticipated to lower employment levels. Specifically, the two-sector model suggests that a rise in the minimum wage would decrease employment within the covered sector while potentially increasing it within the uncovered sector, particularly in developing countries where the latter sector holds a substantial portion of employment. Methodology: The research draws on secondary sources, analysing existing literature and previous studies investigating the correlation between minimum wage adjustments and employment levels. Findings have been varied regarding the minimum wage’s impact on employment, with some indicating a decrease in employment levels or an increase in unemployment due to minimum wage hikes. However, studies specifically focusing on Albania are scarce. Data were collected on minimum wage adjustments and unemployment levels from 2017 to 2022 to assess the relationship between minimum wage changes and unemployment rates, aiming to ascertain whether minimum wage regulations have positively influenced unemployment reduction. Findings: Analysis of the collected data reveals a trend in Albania where increases in the minimum wage correlate with decreases in unemployment. Value: This paper recommended that it is necessary for a more in-depth analysis to be made about the impact of occasional changes in the minimum wage level. It is also recommended that the government consult with business analysts and economic experts and with the businesses themselves so that the change in the minimum wage does not negatively affect the economic development of the country.
Keywords: minimum wage, employment level, unemployment, analysis

https://doi.org/10.58944/cdlw9773