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Dose the Impact of The Minimum Wage on Inflation in Iran Depend on the Position of the Economy in a Particular Stage of the Business Cycle?
Dr Hamid Kordbacheh, Ms Zahra Ahmadi, Dr Abolfazl Shahabadi,
Volume 7, Issue 26 (12-2016)
Abstract

Over past decades there have been conflicting views on whether raising the minimum wage increases inflation. This study updates and expands earlier research into this subject and fills a void in the empirical literature by studying that the impacts of the minimum wage on inflation could be altered in the different economic situations. In framework of cost push inflation theoretical background, the direct and indirect effects of minimum wage changes on wage and inflation can be seen as taking place in several stages. The overall wage inflation outcome can, of course, also depend on the position of the economy in a particular stage of the business cycle. To examine this hypothesis, we used a Markov regime-switching model to study the impact of minimum wage increases on inflation over expansion or recession situations in Iran during the 1973- 2013 period. The comparison between a single-regime and regime shifting models provides the similar results for the sample period. The most important finding of this study is that there is no significant impact of minimum wage increases on inflation regardless of economic situations. However, the results show that the inflation shock positively impacts minimum wage in both models. In sum, our results provide a significant contribution to the empirical literature by verifying that the effectiveness of minimum wage on inflation is not dependent on the business cycle economic situation. The main policy implication for Iran's economy deriving from this study is that the minimum wages should be increased to compensate wage workers for real-wage decrease caused by inflation, without any concern about its inflationary effects.


The Effect of Minimum Wage on Iran's Macroeconomic Variables in The Framework of a Dynamic Stochastic General Equilibrium Model
Mehdi Sajedi, Abbas Amini Fard, Masoud Nunezhad , Ali Haghighat,
Volume 10, Issue 37 (10-2019)
Abstract
In this paper ,in order to investigate the economic effects of the minimum wage policy on macroeconomic variables in the framework of the new Keynesian theory, a dynamic stochastic equilibrium general (DSGE) model has been simulated and estimated for an open and small oil exporter economy conforming with the structure of Iran's economy in the range from 1370 to 1395 .In the above mentioned model, nominal rigidity (wages and prices) and consumer habits are considered to be in line with the economic condition  of the country, the labor market is classified in to sectors of unskilled and skilled labor. The main purpose of this study is to find an answer determining the annual minimum wage based on the CPI mechanism, in which the economy is exposed to supply demand shocks and monetary and financial policies, impacts on the macroeconomic variables, namely GDP, inflation, employment and total wage growth. The results of the simulation and estimation of this model, which show that the simulated data torques are consistent with real-world are based data based on calibration, show that by an increase in the minimum wage can contribute to not only a rise in inflation and total wage level, but also a fall in GPD, consumption &investment in the short time.

Determining the Optimal Minimum Wage in the Framework of a Stochastic Dynamic General Equilibrium Model (Case Study of Iran)
Mehdi Sajedi, Abbas Amini Fard, Masoud Nunezhad, Ali Haghighat,
Volume 13, Issue 47 (5-2022)
Abstract
In this paper, in order to determine the optimal minimum wage policy in Iran, in the framework of the new Keynesian theory, a Dynamic Stochastic General Equilibrium (DSGE) model was estimated for a small and open oil-exporting economy, according to the structure of Iran's economy in the time range of 1190 to 2019. In this model, the nominal rigidity and work habits in the supply and demand sectors are considered, and in order to simulation the economic conditions of the country, meanwhile classify the labor market in two parts; the skilled  (whose maximizes its wage based on its utility) and  unskilled labor, the model has  considered to four parts. The main purpose of this study is to answer the question of determining and adjusting the annual minimum wage based on which of the indicators of inflation, the growth of the total wage and a combination of inflation indicators and productivity of production factors, in a situation where the economy is exposed to markup of wages and prices shocks, supply and the demand of the economy and monetary and financial policies, was optimal and it causes the least negative fluctuation (deviation) on macroeconomic variables including inflation, employment, production, consumption and investment. Based on this study, three scenarios were designed and the effect of minimum wage on economic variables was analyzed. The results of the simulation and estimation of this model, which indicate the matching of the moments of the simulated data with the real world data and based on calibration in all three scenarios, it shows that the selection sum of inflation growth  and the productivity indexes to adjust the minimum wage policy, although it has cyclical effects on inflation, in comparison to other scenarios, it has the least negative deviation on economic variables and can be used as an optimal indicator for choosing the minimum wage in the Supreme Labor Council of the country.

The effect of an increase in minimum wage on the contribution, pension expenses and the cash balance of Iranian Social Security Organization
Abbas Khandan, Peyman Ghasri,
Volume 14, Issue 53 (11-2024)
Abstract
Sustainability of pension funds indicating the balance between contributions and pension expenses, is one of the fundamental principles governing social security systems. Among the things that affect the contributions and pension expenses of the Iran’s Social Security Organization (ISSO)’s fund is the minimum wage which according to Article 41 of Iran’s labor and social security laws, is determined annually by the Iran’s supreme labor council and, every year, becomes a controversial and disputed issue between labor :union:s, employers and the public authorities. An increase in minimum wage have effects on both the received contributions and pension expenses and, as a result, its final effect on the cash balance of ISSO’s fund has been arguable. Considering the issue importance, this paper studies the effect of an increase in minimum wage on ISSO’s contributions, pension expenses and its cash balance during 1961 to 2022 using an econometric time series model of autoregressive distributed lags (ARDL). The results show that a 10% increase in the minimum wage will increase ISSO’s contributions by 25.6% and its pension expenses by 23%. Therefore, comparing the effects, it can be stated that the ISSO’s cash balance would be increased by 2.6% as a results of a 10% increase in minimum wage. To test the result, one more time, the association between an increase in minimum wage and the ISSO’s excess resources was investigated separately. The results once again confirm that the ISSO cash balance would be improved by 3.3% in association with a 10% increase in minimum wage. In this study, it was also shown that the population of contributors, the population of pensioners, the population support ratio, GDP and dummy variables of sanction and Iran-Iraq war have been influential as well.
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