Minimum wage effect on consumption: A regulatory context

In managing the economy of a country, monetary policies and instruments that promote employment are the most important instruments in the hands of the government. The path followed by the developing and post-communist countries is sometimes different because of other obstacles appearing in their economic development. Amongst the strategies used is that of the minimum wage increase policy, which effects to increasing buyers purchasing power and promoting employment growth, but not in all cases the effect of the minimum wage is the same, in the study of Jung et al. (2021) the 1 percent increase in the minimum wage brings a 0.5 percent decrease in real retail trade, in the study of Alonso (2022), the minimum wage has a positive effect. The country under study is Albania. The study’s methodology is based on a multiple regression model and the ordinary least squares (OLS) method. The period studied is from January 2014 to December 2022. Some of the conclusions of the study are that the growth of gross domestic product (GDP) brings a negative impact on consumption, the growth of inflation brings a positive impact on consumption, and the increase in the minimum wage brings a positive impact on the aggregate demand, an argument that shows that it affects the increase in consumption.