Estimating the Effect of an Increase in the Minimum Wage on Hours Worked and Employment in Ireland

Seamus Mcguinness,Paul Redmond

doi:10.2139/ssrn.3209729

Abstract

On the 1st of January 2016 the Irish National Minimum Wage increased from A¢â€sÂ¬8.65 to A¢â€sÂ¬9.15 per hour, an increase of approximately six percent. We use a difference-in-differences estimator to evaluate whether the change in the minimum wage affected the hours worked and likelihood of job loss of minimum wage workers. The results indicate that the increase in the minimum wage had a negative and statistically significant effect on the hours worked of minimum wage workers, with an average reduction of approximately 0.5 hours per week. The effect on minimum wage workers on temporary contracts was higher at 3 hours per week. We found a corresponding increase in part-time employment of 2 percentage points for all minimum wage workers and 10 percentage points for those on temporary contracts. We find no clear evidence that the increase in the minimum wage led to an in-creased probability of becoming unemployed or inactive in the six-month period following the rate change. (This abstract was borrowed from another version of this item.)

Highlights

On the 1st of January 2016, following recommendations from the Irish Low Pay Commission, the Irish National Minimum Wage (NMW) increased from €8.65 to €9.15 per hour, an increase of approximately six percent
The results indicate that the incidence of part-time employment increased by approximately 2 percentage points more in the treatment group compared to the control group following the increase in the NMW
This study assesses the impact of the increase in the minimum wage from €8.50 to €9.15 in 2016 on the hours worked, the incidence of part-time employment and the rate of job loss among minimum wage employees in Ireland

Summary

Introduction

On the 1st of January 2016, following recommendations from the Irish Low Pay Commission, the Irish National Minimum Wage (NMW) increased from €8.65 to €9.15 per hour, an increase of approximately six percent. Employers of minimum wage workers experienced non-trivial changes to labour costs, making this a suitable setting for studying the effects of minimum wage increases on employment outcomes. Prior to this rate change, there was a period of nine years during which the minimum wage did not increase.. The fact that the minimum wage remained stable for several years prior to the 2016 rate change is useful as it allows us to carry out tests to ensure that our estimates are capturing effects relating to the minimum wage change, as opposed to general diverging trends among minimum wage and higher paid workers

Objectives

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Discussion

Conclusion