The impact of minimum wage on enterprise births in European Union countries

This study examines how increases in the minimum wage affect entrepreneurial dynamics in European Union countries, with a particular focus on enterprise births.The research is motivated by the growing need to understand the broader impact of wage regulation on economic activity and the structure of the business sector.The main research question is to what extent changes in the minimum wage influence the decision of potential entrepreneurs to enter the market and whether these effects vary by enterprise size.The empirical analysis is based on panel data from 21 EU member states covering the period from 2015 to 2023.We employ panel regression models, supplemented with robustness tests and size-based differentiation of results.Control variables such as unemployment rate, GDP per capita, and average earnings are also considered.The results show that a higher minimum wage has a statistically significant negative effect on the total number of enterprise births.Regarding enterprise size, this negative effect is more pronounced among newly established businesses with more than 10 employees compared to those with fewer than 10.A possible explanation is that larger new enterprises are more likely to operate in formal sectors with stricter compliance requirements, making them more exposed to wage regulation from the outset.The findings highlight the need to consider the minimum wage not only as a social policy tool but also as a factor that shapes the structure and development of the entrepreneurial environment across different types of economies within the EU.