Minimum wage as the determinant of productivity in EU countries

When introducing and setting minimum wages, primarily to reduce poverty and avoid undesirable phenomena in the labour market, it is necessary to monitor the impact on various aspects of the real economy. This paper focuses on demonstrating the positive impact of nominal minimum wage growth on productivity in EU countries. A cluster analysis is used to divide countries into two distinguished clusters. Using panel regression, the effect of a minimum wage is found to be significant and positive. To rule out spurious regressions and to demonstrate the robustness of the performed analyses, appropriate covariates are included in the models, different forms of productivity are modelled, and the models are also estimated independently for each cluster.