the part-time work into full-time equivalents.<sup>19</sup> In a typical working-age household with two adults, one adult works full-time, and the second adult works part-time for 13% of the full-time equivalent.<sup>20</sup>

**Table 2. Estimates of Living wages, 2020 Euros and RON**

||Poverty<br>Line per<br>Household<br>(Euros),<br>monthly|Share of<br>Labor<br>Income|Minimum<br>Labor<br>Income,<br>Euros,<br>Monthly|Minimum<br>Non-<br>Labor<br>Income,<br>Euros,<br>Monthly|Average<br>Number of<br>Household<br>Members<br>that work<br>full time|Average<br>Number of<br>Household<br>Members<br>that work<br>part-time|Required<br>Monthly<br>Minimum<br>Wage<br>(Euros)|Required<br>Monthly<br>Minimum<br>Wage<br>(RON)|
|---|---|---|---|---|---|---|---|---|
|Food Basket|316.3|0.82|260.9|55.4|1|0.13|**245**|1,185|
|Food Basket<br>(with<br>adjustments)|453.3|0.82|373.9|79.4|1|0.13|**351**|1,699|

Source: Own estimates based on European Commission (2015) and 2021 EU-SILC.

**As a third step, we estimate the living wage and compare it with the net statutory minimum wage.** The living wage is defined as the monthly wage needed to support an average-sized poor family<sup>21</sup> out of extreme poverty (defined by the cost of the food basket), considering the labor income shares and the share of parttime/full-time work in an average poor household. Our estimates show that in Romania, this level is approximately 245 EUR (1,185 RON) or 351 EUR (1,699 RON) when considering the non-food component in 2020 currency (Table 2).

**This indicates that the net monthly statutory minimum wage (276 EUR) is higher than the living wage necessary to cover food (245 EUR) but not enough to cover the non-food component (351 EUR), which has several economic implications.** First, an adequate minimum wage that covers the cost of the basic consumption basket (including food and non-food components) can potentially reduce the need for workers to rely heavily on social assistance programs, as they can meet their basic needs through their earned wages. Second, in the context of working-age households, promoting greater labor market activity is critical. Encouraging more individuals to participate in gainful employment can increase income levels, providing them with a more robust financial foundation to overcome poverty. Not surprisingly, the typical poor household has a labor income share of 15% (including pensioners and other households with 0% labor income share). In

> 19 Work intensity in poor households is low. On average, the members of poor households who are of working age (1859 years old, students excluded) worked for only 54% of the year. Eurostat defines work intensity as the ratio of the total number of months that working-age household members have worked during the income reference year and the total number of months the same household members theoretically could have worked in the same period.

> 20 The labor activity rate in Romania is low compared to the average EU level. According to the Eurostat for the age group 20 – 64, the labor activity rate is 77% for men and only 59% for women.  Only in Italy, and Greece female labor activity rate is lower than in Romania.

> 21 Here, we assume the family of two adults and one child.

19