comparison, the typical poor household with at least one working member has a labor income share that is substantially higher (82%). Third, a minimum wage surpassing the living wage (including the non-food component) could reduce income inequality by lifting the income of the lowest-paid workers closer to the poverty threshold. This may lead to a more equitable income distribution. Fourth, there might also be concerns about potential job losses or reduced hours if employers find it difficult to afford the higher wage, especially if not aligned with workers' productivity. Striking the right balance between workers' income and job market stability is crucial. Therefore, the impact of an adequate minimum wage on labor market dynamics, such as potential job creation or loss, should be evaluated. Moreover, an adequate minimum wage, enough to cover the cost of the basic consumption basket, should ideally be adjusted periodically to account for inflation and changes in the cost of living, maintaining its purchasing power over time.

**There are alternative estimates of consumption baskets for Romania; we did not use these estimates as a reference to the minimum consumption basket due to methodological caveats.** Friedrich Ebert Stiftung (2022) publishes estimates of the minimum consumption basket needed for a decent life. In 2022, the estimated monthly value of the basket for a family composed of two adults and one child was 7,112 RON (1,260 in 2020 euros). Using this as a reference for our estimation procedure (using the same labor income share and labor supply parameters used above), the corresponding minimum wage would equal approximately 3,897 RON (805 in 2020 euros) net and approx. 6,687 RON (1,382 in 2020 euros) gross. This value is significantly higher than the average gross salary (approx. 6,500 RON gross in 2022). In addition to this, there are other methodological caveats (see Box 1 for details). Therefore, our research did not use this basket as a reference basket.

# Box 1. Friedrich Ebert Stiftung Foundation (FES) Minimum Consumption Basket

The Romanian law regarding the indexing of the minimum wage based on the minimum monthly basket for a decent living relies on the research conducted by the Friedrich Ebert Stiftung Foundation (FES) – The Minimum Consumption Basket for a Decent Living for the Population of Romania (Guga et al., 2018). This research defines expense categories and the necessary quantities of goods and services for various types of families.

The analysis on which the value of the minimum consumption basket is established presents a series of limitations: a) **The methodology for calculating the minimum consumption basket for a decent living can generate biased estimates and potentially not representative.** To define the minimum consumption basket for a decent living, group interviews were conducted only in large cities (Brașov, Cluj, Constanța, Iași, Timișoara), with an extremely limited sample: 8-12 employees from various sectors such as public administration, education, public services, trade, industry, IT, and the banking system participated in each group interview. Such a small number of observations collected from only five cities cannot generate relevant and statistically significant results for the entire country.

b) **The value of the minimum consumption basket for a decent living seems to be overestimated since it exceeds the average net salary recorded in the vast majority of counties in the country.** The most recent update of the minimum consumption basket for a decent living (September 2023) indicates a value of 9978 RON for the reference family consisting of two adults and two children, equivalent to a net salary of 4,989 RON per 20