Objective: Analyse the economic and social impacts of raising the minimum wage in Romania, focusing on shifts toward the informal economy.

Methodology: Used VECM and Granger causality analyses with quarterly data (2000–2019) to simulate three scenarios: baseline, a 7% increase, and a 15% increase in minimum wage and their impact on informal employment.

Project Manager: Davidescu Adriana Ana Maria

Period: October–November 2016

Beneficiary: Ministry of Labor and Social Protection

Key Findings:

• Long-term Impact: Minimum wage increases positively affect the shadow economy, particularly among low-skilled workers.
• Scenario Results: 7% and 15% wage increases are projected to expand informal employment due to rising labour costs in the formal sector.

Policy Implications:

• Emphasized caution in future minimum wage hikes, suggesting pre-assessment to evaluate labor market impacts.
• Recommended measures to mitigate potential shifts to informal employment.