Management Summary Research Study „How Do Changes in the Minimum Wage Affect Household Consumption?“

Minimum wage hikes increase the consumption of affected households. This paper studies the structure of the additional consumption across various low-income household types. Using a unique set of cross-sectional data at the household level in the Czech Republic, I simulate the impact on consumption categories of additions to disposable income due to minimum wage increases between 2011 and 2019. My findings suggest that the additional income is predominantly allocated to essentials, despite a drop in their budget share. Consumption of addictive goods represents a luxury for low-income households, among whom the demand is even more elastic for those with children. Similarly, health and education expenditures are substantially income sensitive for households with children. The paper helps to deepen the knowledge of the consumer behaviour of households of low-income employees and can be used in economic policy design, in setting the minimum wage or in the areas of tax and social policy.

Target groups of stakeholders: Ministers of Labour and Social Affairs, Ministery of Finance, research institution dealing with consumption research and public poicies

Citation: Bittner, J. (2023). How Do Changes in the Minimum Wage Affect Household Consumption? Statistika: Statistics and Economy Journal, 103(1), 5–29.

Source: https://www.czso.cz/csu/czso/how-do-changes-in-the-minimum-wage-affect-household-consumption