The impact of minimum wage adjustments on household consumption

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Κοντογιάννη, Ιωάννα

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This dissertation investigates the impact of minimum wage fluctuations in Greece on household consumption across 12 categories of goods and services from 2009 to 2021. Utilizing data from the Hellenic Statistical Authority's Household Budget Survey, we analyzed the spending habits of 2,617 households in real and nominal terms. Households are classified into four categories based on a metric that calculates the share of total family income contributed by their two highest-paid members, whose individual incomes fall within 30–140% of the minimum wage. Ordinary Least Squares (OLS) regression models are employed in two distinct phases of analysis, both of which include control variables like household characteristics, geographic indicators, and year dummies to adjust for externalities. The first phase of the analysis evaluates how these household categories allocate their expenditure shares across the 12 goods and services categories, while the second one investigates how these allocations are influenced by the austerity-driven minimum wage reduction in 2012 and the subsequent increase in 2019. The findings reveal that households closer to the minimum wage concentrate a larger share of their expenses on essentials like food and housing while spending less on transport, dining, and education. After the minimum wage drop in 2012, low-wage households notably increased their spending on crucial categories such as food, while cutting back on non-essential items. In contrast, when it rose in 2019, these households marginally decreased their spending on essentials but shifted more towards discretionary items like personal care and jewelry. These findings offer valuable insights into the economic behavior of families in response to policy-driven wage adjustments, highlighting the need for tailored welfare programs and more comprehensive minimum wage policies.



Minimum wage, Consumption, Low-wage households, Expenditure, Consumer Price Index (CPI), Household Budget Survey (HBS)