SOCOL CRISTIAN| MARINAS MARIUS MINIMUM WAGE AS A PUBLIC POLICY INSTRUMENT – PROS AND CONS It is absolutely necessary to restore the balance in the process of negotiation between the representative trade unions and employers on the working conditions in order to functionalize an economic model able to assure the economic sustainability. Staying in the vicious circle of low wages and unsatisfactory working conditions will hinder the achievement of higher productivity and will send Romania into the"average income trap": poor and unevenly distributed economic growth, low investments in education, health care and human resources, etc. 4. What is the optimal level of the minimum wage in the economy? Has it increased too much in Romania? As regards the optimal level and dynamics of the gross minimum wage in the economy, the International Labor Organization published in 1970 three fundamental principles for fixing a decent level of the minimum wage: correlation of the minimum wage with the consumption needs of workers and their families/the minimum consumer basket, correlation with the government's employment expansion targets and due consideration to the factors related to the need for productivity improvement and economic growth. The European Social Charter revised in 1996 stipulates the need for a fair remuneration able to assure a decent living standard for workers and their families. This could be achieved through a net minimum wage equal to 60% of the net average wage. This corresponds to a gross level of 50% to 60% of the gross average wage, depending on the progressiveness of taxation(the higher the taxation progressiveness, the closer the gross minimum wage percentage to 50% of the gross average wage). A joint report of ILO, OECD, IMF and WORLD BANK (G20, 2012) considers that a minimum wage level of 30-40% the median value of the gross average salary (equivalent to a minimum wage of 25-30% of the average wage) would have net positive effects. IMF(2016a) concludes that, for the CESEE countries, if the minimum wage exceeds 45-50% of the average wage, the negative effects of the minimum wage increase can outstrip the benefits. It is stated, for instance, that"an increase of 10% beyond this limit is associated to a 2% decline in youth employment." Conversely, if the minimum wage is 30% of the average wage, an increase by 10% in the minimum wage would trigger a contraction of youth employment by only 0.4%. An IMF report(Country Report Romania, Selected Issues, No. 16/114, 2016b) shows that, following the increase in May 2016 to RON 1,250(+78.6% from the end of 2012) the gross minimum wage"will reach 45.3% of the average wage, which is a high value according to the international standards". The IMF experts do not necessarily say that the gross minimum wage(in EUR, for comparison purposes) is high, but that its increase is too fast. Specifically, its share of over 45% of the average wage exceeds the optimal threshold of sustainability beyond which an excessively fast positive evolution of the minimum wage would boost the negative effects on the economy(on employment, competitiveness, etc.) outstripping the benefits generated by this public policy(reduction of inequality, action of the efficiency wage theory, expansion of consumption, rise of the living standard and a favorable impact on the economic growth). A comparative analysis of the minimum wage in the economy and of its purchase power in EU countries/non-EU countries in the region shows that in the second half of 2016 Romania ranked second to last in the European Union in point of minimum wage level in Euro(Figure 6) and third to last in point of minimum wage at purchasing power parity (Figure 7). 16