Minimum wage effects on educational enrollments in New Zealand

Abstract

This paper empirically examines the impact of minimum wages on educational enrollments in New Zealand. A significant reform to the youth minimum wage since 2000 has resulted in some age groups undergoing a 91% rise in their real minimum wage over the last 10 years. Three panel least squares multivariate models are estimated from a national sample of nine age cohorts each year over 19 years. This allows analysis of the impact of increases in minimum wage over time and of the introduction of the minimum wage for teenagers in 1994. Our findings indicate that in New Zealand, changes to minimum wages appear to have an insignificant impact on the enrollment levels of 16–24 year olds and the subgroup of 20–24 year olds. In both cases, the standard errors are large making these results unclear. For the subgroup of 16–19 year olds, minimum wage rises have a statistically significant negative effect on enrollment levels. However, the introduction of the minimum wage appears to have had a significantly positive impact on teenagers’ enrollment levels, a possible indication of the ineffective level the minimum wage was set at, in terms of reservation wages of youth in New Zealand.