administrative tax data and microsimulation techniques, making it the first study to utilize such comprehensive data for assessing the impacts of the minimum wage. The primary goal is to evaluate the potential effects of increasing minimum wages and aligning them with living wages in Romania. The study explores the characteristics of minimum-wage workers using a detailed administrative tax dataset from the Romanian Ministry of Finance. Subsequently, it assesses the potential impacts of recent minimum wage increases using the same dataset. By applying labor demand elasticities estimated for other countries, the study simulates the effects of the minimum wage increase on wages, net labor earnings, and employment. Additionally, it examines the distributional consequences of alternative minimum wage adjustments.

<mark>We aim to evaluate the potential impacts of the proposed minimum wage increase on employment and earnings. Specifically, we intend to disentangle two categories of effects:</mark>

- **<mark>Disemployment Effects:</mark>** <mark>When minimum wages are "binding," there is a potential for reduced job creation and increased job loss among low-skilled workers. Numerous global examples indicate that higher minimum wages can diminish employment, especially for the least skilled employees. The expected employment effects of minimum wages are contingent upon the structure of labor demand. As explained above, in theory, while competitive labor markets can potentially yield adverse employment outcomes among low-skilled workers, this is not always the case in monopsonistic situations, where a surge in labor demand might also arise depending on the minimum wage level. These theoretical employment variations (on the extensive margin) are usually observed over the long term. In the short term, other adjustment mechanisms could delay changes in worker behavior (e.g., adjustments on the intensive margin, shifts in working hours (Stewart and Swaffield, 2008), firm profitability (Mirko et al., 2011), transfer of higher labor costs into final prices (Lemos, 2004) or incomplete non-compliance (Metcalf, 2008). The comprehensive assessment of overall employment effects is an empirical question specific to the country under study.</mark>

- **<mark>Distributional Effects</mark>** <mark>: Due to the disemployment effects, the minimum wage is not a “free lunch” and creates winners and losers. Rising minimum wages could generate distributional impacts, leading to increased earnings for some employed workers while triggering job losses for others, especially among younger and older low-skilled individuals. Who is most susceptible to the impacts of minimum wage hikes? Are the aggregate gains outweighing the losses? Balancing employment reductions against wage increases raises the broader question of how the minimum wage influences inequality. Suppose the beneficiaries of a minimum wage increase, predominantly from low-income families, experience substantial gains, and the losses are concentrated among higher-income workers or other groups that policy makers are open to redistributing income from. In that case, the adverse effects on the losers may be considered acceptable (Neumark, 2018).</mark>

12