Opponents of a meaningful minimum wage in Georgia often argue that it would destroy jobs. A large body of recent research from Europe and the United States finds that well-designed minimum wage increases raised pay with little or no loss of employment — most prominently Germany’s 2015 introduction of a national minimum wage. But the evidence is not unanimous, and Georgia’s high informality raises specific risks. This analysis reviews the evidence and draws cautious lessons for Georgia.
Key Findings
- Germany introduced a national minimum wage of €8.50 in January 2015, affecting 15% of employees. A study in the Quarterly Journal of Economics found that it raised wages but did not lower employment (Dustmann et al., 2022).
- The German minimum wage moved low-wage workers from smaller, lower-paying and less productive firms to larger, higher-paying and more productive ones; this reallocation accounted for up to 17% of the wage increase (Dustmann et al., 2022).
- US research using 138 state-level increases found that the number of low-wage jobs was essentially unchanged (Cengiz et al., 2019).
- Other researchers argue that much US evidence still shows job losses for the least skilled (Neumark & Shirley, 2022). The debate concerns the size and conditions of effects more than their existence.
- Evidence from high-income economies with mostly formal labour markets cannot be applied directly to Georgia, where around 37% of employment is informal (Pignatti, 2026).
1. Introduction
Georgia’s private-sector minimum wage of GEL 20 has not changed since 1999 (see GILS analysis of the minimum wage). One of the main arguments against reform is that a higher minimum would reduce employment, particularly in small firms. This analysis asks what the international evidence says, and what it implies for a country like Georgia.
2. The Evidence
| Setting | Study | Main finding |
|---|---|---|
| Germany, 2015 national minimum wage (€8.50) | Dustmann et al. (2022), QJE | Raised wages; did not lower employment; reallocated low-wage workers to larger, higher-paying, more productive firms (up to 17% of wage gain) |
| United States, 138 state-level increases | Cengiz, Dube, Lindner & Zipperer (2019), QJE | Number of low-wage jobs essentially unchanged; jobs below the new minimum shifted to just above it |
| United States, review of studies | Neumark & Shirley (2022), Industrial Relations | Argue that the bulk of US evidence still points to negative employment effects for the least skilled |
2.1 Germany: a first-time national minimum wage
Germany is the closest parallel to Georgia’s situation: a country introducing a binding national minimum wage for the first time. Comparing individuals and regions with different exposure, Dustmann and colleagues found higher wages, no fall in employment, and a shift of workers towards more productive firms. Average establishment quality rose in the most affected regions (Dustmann et al., 2022).
2.2 The US debate
Cengiz and colleagues compared the number of jobs paying below and just above new minimum wages and found that jobs below the new minimum were largely replaced by jobs just above it, with little change in total low-wage employment (Cengiz et al., 2019). Neumark and Shirley, reviewing a broader set of US studies, conclude that negative effects on the least skilled remain the predominant finding (Neumark & Shirley, 2022). The disagreement reflects differences in methods and in the size of increases studied.
3. Lessons for Georgia
The level matters
The studies showing small or no employment effects concern minimum wages set at moderate levels relative to local wages. A Georgian minimum wage introduced at a moderate share of average or median earnings and raised gradually would be closer to these conditions than a sudden jump to EU reference values.
Informality changes the risks
In a labour market where many employers already operate informally, a higher minimum wage could push some employment further into informality rather than eliminating it. This risk is real in Georgia, where informality is concentrated in micro-enterprises and agriculture. It argues for combining a minimum wage with stronger labour inspection, simplified formalisation and monitoring of informality.
Reallocation can raise productivity
The German evidence suggests that a minimum wage can push workers towards more productive firms. In Georgia, where productivity growth is a long-standing challenge, this channel could be valuable — but only if more productive firms exist to absorb workers.
4. Limitations
This review covers a small number of influential studies from high-income economies. Evidence from middle-income countries with large informal sectors is more limited and more varied. No study of minimum wage effects in Georgia exists, because the minimum wage has not been binding.
5. Conclusion
The best recent evidence shows that moderate minimum wages can raise pay without large job losses, and Germany’s experience is directly relevant to a first-time introduction. But the evidence is contested, and Georgia’s informality calls for caution. The lesson is not to avoid a minimum wage, but to introduce one gradually, at a moderate level, with independent monitoring of employment and informality.
GILS Recommendations
- Introduce a minimum wage at a moderate starting level, informed by the wage distribution, with a published path for increases.
- Commission an independent evaluation of employment and informality effects from the outset, using administrative and survey data.
- Combine the minimum wage with enforcement and formalisation measures to limit shifts into informality.
- Publish the wage distribution, including median earnings, so that the minimum’s bite can be measured.
GILS Position
The evidence does not support the claim that any meaningful minimum wage will destroy jobs. It does support caution about level, pace and enforcement. GILS supports an evidence-based minimum wage introduced gradually and evaluated independently.
References
- Dustmann, C., Lindner, A., Schönberg, U., Umkehrer, M. & vom Berge, P. (2022). Reallocation Effects of the Minimum Wage. Quarterly Journal of Economics, 137(1), 267–328. doi.org/10.1093/qje/qjab028
- Cengiz, D., Dube, A., Lindner, A. & Zipperer, B. (2019). The Effect of Minimum Wages on Low-Wage Jobs. Quarterly Journal of Economics, 134(3), 1405–1454.
- Neumark, D. & Shirley, P. (2022). Myth or Measurement: What Does the New Minimum Wage Research Say about Minimum Wages and Job Loss in the United States? Industrial Relations, 61(4), 384–417.
- Pignatti, C. (2026). Recent Trends on Informal Employment in Georgia. ILO Working Paper 159. doi.org/10.54394/MOJI5185
Suggested citation: GILS Research Team (2026). Do Minimum Wages Cost Jobs? Evidence and Lessons for Georgia. Editor: G. Pkhakadze. Georgian Institute of Labour Studies, Tbilisi. labour.edu.ge
GILS analyses are prepared with AI-assisted drafting. All figures and claims are verified against the cited primary sources and reviewed under the responsibility of the Editor.