Minimum wages, collective bargaining and wage dispersion : the spanish case

Abstract

Recent empirical work on the employment effects of minimum wages in Spain has shown negative, albeit not large, effects on youth and low skilled-workers'employment prospects. In this paper we tackle this issue in greater depth. Specifically, we analyse how collective wage bargaining, by fixing minimum wages above statutory ones, affects the overall wage structure and employment. We develop a simple model with monopsonistic features, resulting in externalities in wage-setting by firms, which may give rise to wider wage dispersion than that implied by the introduction of minimum wages.