The Employment Effect of an Increase in the Swedish Minimum Wage: An empirical study of the 2005 wage agreement between SKL and Kommunal

Sammanfattning: This thesis investigates the relationship between a minimum wage increase and change in employment for municipality workers in Sweden between 2003 and 2007. The effect is estimated by performing a natural experiment comparing a treatment group of workers affected by the increase to a control group of unaffected workers. The results identify a positive effect for the aggregate employment levels after the minimum wage was raised in April 2006. The effects are stronger in the larger municipalities while almost zero for the smallest quartile of municipalities. Overall our results contribute to the recent studies challenging the neoclassical models and their view of the labour market, emphasizing the complexity in foreseeing the effect of minimum wages.