4

According to this article and this one, the minimum monthly salary for foreign workers in Romania is significantly larger than the minimum one for local workers:

Effective January 6, 2018, the minimum monthly salary for foreign workers in Romania has increased to RON 4,162, up 33 percent from last year. The minimum monthly salary for highly-skilled workers has increased to RON 16,648. (..) Initial and renewal applications. Employers of foreign nationals seeking to obtain or renew a work permit on or after January 6, 2018 must increase the foreign national’s minimum salary to comply with the new rule

As projected, effective January 1, 2018, Romania’s national minimum wage will be increased from RON 1,450 per month to RON 1,900 per month.​

The number of foreign (e.g. coming from non-EU countries) workers is subject to regulation, so I do not see how foreign workers can disrupt labor market.

Question: Why would a country impose higher minimum salary for foreign workers than for the local ones?

  • 2
    Is this a true minimum wage (= employers need to pay at least that amount, whatever the job), or is it just a requirement for getting a visa? (“You may come here if you show that you already have a job where you earn at least that amount.”) – chirlu May 30 '18 at 8:34
  • @chirlu - good question. It is not clear for me, I will have to check. – Alexei May 30 '18 at 8:52
  • 1
    Isn't the answer obvious? To encourage employers to hire local workers. – jamesqf May 30 '18 at 17:43
  • @jamesqf - as already mentioned, there is a foreign workers quota that is evaluated yearly based on labor market context. So, there is already a barrier to protect local workers and the quota is approved based on proof that the companies cannot find local people to hire. – Alexei May 30 '18 at 18:44
6

There are two theories about minimum wage.

  1. Minimum wages increase wages without any offsetting reduction in employment.

  2. Minimum wages reduce employment, since they outlaw jobs at lower pay. While some jobs may increase hourly pay, they will reduce hours or eliminate other jobs to compensate.

People who hold to the latter theory may well want to reduce jobs for foreigners more than they reduce jobs for domestic workers. So as a form of labor protectionism, they put a higher minimum wage for foreigners. This serves to discourage the hiring of cheap domestic workers while still allowing companies that really need foreign workers to hire foreign.

If this is only a visa requirement, it's even simpler. They only want high paid foreign workers because those are the most likely to pay taxes and least likely to use services. A side benefit is that they don't compete with low wage workers, making it easier to maintain full employment in low wage jobs.

  • 1
    I feel like everyone agrees that minimum wages cause unemployment, it's just that some people read the data such that small increases in the minimum wage up to a certain level have little to no impact on unemployment and are thus worth it. I don't think anyone is saying a $100 minimum wage would not effect employment. – lazarusL May 30 '18 at 16:45
  • And the third theory would be that minimum wages cause employment since they fire up the economy by increasing domestic demand. So much for that. @lazarusL: certainly not everyone agrees. – Hans-Peter Störr Jun 1 '18 at 5:01
  • @Hans-PeterStörr I'm really interested in how that could work, can you link to an article describing how economists came to that conclusion? – lazarusL Jun 1 '18 at 12:36
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    @lazarusL I don't have a link to satisfy you with, but I believe the rationale is "higher wages => more cash to spend for the employed => more cash being spent by the employed => need more jobs to produce and sell those goods, which are easier to fill (in higher demand) thanks to better wages." The crux between all three proposals is exactly how things balance out at any particular wage level: are the jobs lost by companies cutting wage costs more or less, and by how large a margin, than the ones produced by increased consumer activity in the remainder? – zibadawa timmy Jun 3 '18 at 8:41
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Look at it the other way around.

  • The EU offers work permits to highly skilled immigrants.
  • How do you define what a "highly skilled immigrant" is? Easy, it is anybody who can earn 1.5 times the average annual gross salary with those skills.

Otherwise there could be endless squabbling if a concert violoncellist is more or less skilled than a college-dropout computer programmer. This lets the job market determine skill levels.

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