# **III. Identification and Profile of Minimum Wage Workers** Data and methodology to identify minimum wage workers

**This research is based on administrative tax data from the Romanian Ministry of Finance** . The monthly microeconomic datasets encompass all employees who paid income tax based on their labor income during 2020-2021, comprising the full formal-sector universe. The income tax is deducted monthly from employee salaries by employers. The dataset comprises all salaried employees, excluding self-employed individuals. Our unit of observation is the taxpayer, but details about the employer (firm) are also available. The monthly count of taxpayers ranges from 6.9 million to 7.4 million. The dataset provides comprehensive information from the entire tax form, allowing observation of various characteristics of both employees and firms.

**There are several advantages of using tax administrative data instead of household survey data for labor market analysis.** The mandatory requirement to participate in administrative data programs is a notable advantage compared to voluntary survey participation. This legal obligation helps mitigate challenges related to non-response, as identified by UNECE (2011) and minimizes concerns about sample selection and nonrandom attrition. Unlike survey data, administrative records are less prone to selective underreporting, particularly among high-income individuals. Additionally, administrative records offer more detailed and frequent information than census data. While survey data may encounter problems like misreporting and misunderstanding of questions, leading to measurement errors, these issues can also impact administrative data.

**However, since the administrative tax data does not include individuals engaged in informal sector employment, this poses a significant challenge in understanding the entirety of the labor market landscape.** Not being able to identify informal sector workers from the administrative tax data creates a void in our understanding of a substantial and often economically significant workforce segment. The absence of their representation in the administrative tax data limits our ability to capture this sector's dynamics, challenges, and contributions. Information to identify informal sector workers is available in the EU SILC data; however, the small share of workers earning minimum wage in the household survey limits our analysis with the household survey data.

**The administrative tax data set includes relevant income variables, including gross salary, net salary, social security contributions, taxation base, bonuses, vouchers, and COVID-19 incentives.** Data on gross salaries is crucial for the identification of minimum-wage workers. Our data source also includes other employee characteristics such as region, age, number of days, and hours worked. However, we do not observe information on educational levels or occupations. We also observe the characteristics of the firms: sector of the economy, number of employees, total turnover, total salary fund, and profits. The construction sector is entitled to additional fiscal facilities; therefore, additional variables identify employees in the construction sector and

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