SOCOL CRISTIAN| MARINAS MARIUS MINIMUM WAGE AS A PUBLIC POLICY INSTRUMENT – PROS AND CONS Considering the two inflection points shown in the previous chart, we compared for two subperiods the dynamics of the minimum wage to the evolution of work productivity at national level(determined as the ratio of gross value added to employed population) and of the consumer price index. Thus, according to Figure 12, from Q2 2003 to Q4 2007, the productivity increase rate was 2.5 times higher than that of the minimum wage, which rose by only 56% in nominal terms, with the values from Q1 2003 being considered as 100%. The dynamics of the minimum wage was even inferior to that of inflation up to Q1 of 2007, a fact also reflected by the decline in the purchasing power of the employees paid at the minimum level. Figure 12. Relationship of the minimum wage to productivity and inflation(2003:2-2007:4) 140.0% 120.0% 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% 2003 20 .q 0 2 3 20 .q 0 3 3 20 .q 0 4 4 20 .q 0 1 4 20 .q 0 2 4 20 .q 0 3 4 20 .q 0 4 5 20 .q 0 1 5 20 .q 0 2 5 20 .q 0 3 5 20 .q 0 4 6 20 .q 0 1 6 20 .q 0 2 6 20 .q 0 3 6 20 .q 0 4 7 20 .q 0 1 7 20 .q 0 2 7 20 .q 0 3 7.q4 Gross minimum wage CPI Work productivity The lack of correlation between the minimum wage and work productivity, specific to the 2003-2007 subperiod, was also present in 2008-2016(Figure 13), but in the latter the increase of the minimum wage was superior to that of productivity: 110% and 62.4%, respectively, compared to Q1 2008(100%). The lack of connection to productivity and inflation was obvious from the moment when the minimum wage became a priority of the government policy. While before 2008 the minimum wage was neglected and not correlated to the overall situation of the economy, from 2013 the relatively high rates of economic growth allowed for a rise in the wage ceiling, which, in turn, boosted consumption and growth beyond the initial forecast levels. Furthermore, the successive increases of the minimum wage expanded the purchasing power of their beneficiaries by 65%, in the context of the deflation pressure put on the Romanian economy by internal factors(cuts of VAT for food and of social welfare contributions, demand deficit, etc.), as well as by external ones(decline in the global price of raw materials, slow recovery of the global economy, etc.) 2 1