The Effects of Increasing the Minimum Wage on Employment in the Republic of Srpska

Abstract

 Introduction: The minimum wage is an important instrument of economic and social policy because it affects workers' standard of living, business costs, and the labor market.  In the Republic of Srpska, the question of its increase often causes discussions about the effects on employment and competitiveness. This paper analyzes the impact of minimum wage changes on the labor market in the Republic of Srpska in the period 2017–2024. 

Aim: The objective of the research is to determine whether the increase in the minimum wage statistically affects employment and which factors contribute most to its changes, with an emphasis on the difference between the public and private sectors.

 Materials and Methods: The analysis was conducted on the basis of quarterly data from the Statistical Office of the Republic of Srpska for the period 2017–2024, using multiple regression analysis. The dependent variable is the number of employees, and the independent variables are the minimum wage, GDP, average wage, tax wedge, unemployment, employment by sector, import, export, and CPI. Statistical processing was done in Microsoft Excel.

 Results: The minimum wage has no significant effect on employment (p > 0.05). The key factors are the number of employees in the private sector and unemployment. The model has high explanatory power (R² = 0.9986)

 Conclusion: The increase in the minimum wage in the Republic of Srpska does not lead to a decrease in employment but has a neutral effect. The future policy of its determination should be harmonized with the growth of productivity and the needs of the labor market.