Youth Minimum Wage Research Articles

The Young Bunch: Youth Minimum Wages and Labor Market Outcomes

The authors estimate the effects of an increase in the youth minimum wage in the Netherlands on low-paid workers’ employment and earnings, using a difference-in-differences approach with detailed administrative data. Findings show that the increase does not have a negative effect on the number of jobs or hours worked, hence raising overall earnings for affected workers. Further, the minimum wage increase has substantial spillover effects, accounting for close to 70% of the average wage increase experienced by workers. While employment grows in fixed-term and temporary help agency contracts, the authors do not find evidence of declines in employment in other types of work arrangements, nor of labor-labor substitution. Labor market outcomes evolve most favorably for full-time incumbent workers who are not enrolled in education and are thus less likely to be transient occupants of minimum wage jobs.

The Dutch system for youth minimum wages: expressing concern about age discrimination and the rights of young people

The Dutch system for youth minimum wages: expressing concern about age discrimination and the rights of young people

Minimum Wages in New Zealand: Policy and Practice in the 21st Century

New Zealand has seen dramatic changes in minimum wage policies since 2000. The adult minimum wage has increased 75% in CPI-adjusted real terms. In addition, the youth minimum wage was abolished in two stages, resulting in a 125% increase in the real minimum wage for 16–19-year-old workers. We review the motivations for minimum wages and the changes and analyse how they have affected workers outcomes. We find that the minimum wage now strongly determines the wages of teenage workers, with the minimum wage now at the median wage of teenagers, and over half of 16–17-year-olds, and about 40% of 18–19-year-olds, earning at or below the minimum.Although we find no clear evidence that increases in the minimum wage have led to adverse employment effects, we expect there are downside risks for youth and low skilled workers' employment. As minimum wage workers are broadly spread across the household income distribution, we conclude that minimum wages are largely ineffective as a redistributive income support policy.

Minimum Wages in New Zealand: Policy and practice in the 21st century

New Zealand has seen dramatic changes in minimum wage policies since 2000. The adult minimum wage has increased 75% in CPI-adjusted real terms. In addition, the youth minimum wage was abolished in two stages, resulting in a 125% increase in the real minimum wage for 16–19-year-old workers. We review the motivations for minimum wages and the changes and analyse how they have affected workers outcomes. We find that the minimum wage now strongly determines the wages of teenage workers, with the minimum wage now at the median wage of teenagers, and over half of 16–17-year-olds, and about 40% of 18–19-year-olds, earning at or below the minimum. Although we find no clear evidence that increases in the minimum wage have led to adverse employment effects, we expect there are downside risks for youth and low skilled workers' employment. As minimum wage workers are broadly spread across the household income distribution, we conclude that minimum wages are largely ineffective as a redistributive income support policy.

Long‐Term Impact of Minimum Wages on Workers’ Careers: Evidence from Two Decades of Longitudinal Linked Employer–Employee Data

AbstractWe analyze the impact of high youth minimum wages, relying on two decades of linked employer–employee data and a major law change. Alternative treatment/control groups follow from two strands of the literature, one tracking low‐skilled workers employed before the law change, who are eligible for a large wage increase, and one tracking the employment of full cohorts, whether working or in school when the law changed. High minimum wages led to a short‐term wage gain, which faded over time. They did not jeopardize employment prospects. Changes in the hours worked by part‐time workers point to increased job attachment.

Youth minimum wages and youth employment

This paper performs a cross-country level analysis on the impact of the level of specific youth minimum wages on the labor market performance of young individuals. We use information on the use and level of youth minimum wages, as compared to the level of adult minimum wages as well as to the median wage (i.e., the Kaitz index). We complement these data with variables on the employment, labor force participation, and unemployment rates of 5-year age interval categories—all derived from the official OECD database. We distinguish between countries without minimum wages, countries with uniform minimum wages for all age groups, and countries with separate youth and adult minimum wages. Our results indicate that the relative employment rates of young individuals below the age of 25—as compared to the older workers—in countries with youth minimum wages are close to those in countries without minimum wages at all. Turning to the smaller sample of countries with minimum wages, increases in the level of (youth) minimum wages exert a substantial negative impact on the employment rate for young individuals.JEL Classification: J21, J23, J31

Do Lower Minimum Wages for Young Workers Raise Their Employment? Evidence from a Danish Discontinuity

We estimate the impact of youth minimum wages on youth employment by exploiting a large discontinuity in Danish minimum wage rules at age 18, using monthly payroll records for the Danish population. The hourly wage jumps by 40% at the discontinuity. Employment falls by 33%, and total input of hours decreases by 45%, leaving the aggregate wage payment almost unchanged. We show theoretically how the discontinuity may be exploited to evaluate policy changes. The relevant elasticity for evaluating the effect on youth employment of changes in their minimum wage is in the range 0.6 to 1.1.

Do Lower Minimum Wages for Younger Workers Raise Their Employment? Evidence from a Danish Discontinuity

We estimate the impact of youth minimum wages on youth employment by exploiting a large discontinuity in Danish minimum wage rules at age 18, using monthly payroll records for the Danish population. The hourly wage jumps up by 40 percent at the discontinuity. Employment falls by 33 percent and total input of hours decreases by 45 percent, leaving the aggregate wage payment almost unchanged. We show theoretically how the discontinuity may be exploited to evaluate policy changes. The relevant elasticity for evaluating the effect on youth employment of changes in their minimum wage is in the range 0.6-1.1.

Focus: Policy on the hoof: lobbying and minimum wage compliance in New Zealand

FOCUS ❐ MINIMUM WAGES ests being placed ahead of the national interest. As New Zealand’s largest earning export, dairy is big business in New Zealand. However, there is strong evidence that dairy farmers in New Zealand are breaching basic workers’ rights on a systemic basis. In early 2014, the government’s Labour Inspectorate found that 31 of 44 dairy farms inspected were breaching basic employment conditions . This is not surprising given earlier studies suggesting that fewer than 2 in 5 dairy farmers kept the required basic employment records such as wage and time logs. This poses a significant minimum wage compliance issue since in the busy season workers can often work 12-16 hour days, 11 or 12 days in a row. Given the low wages, isolation and very long hours it has become increasingly difficult to recruit New Zealand workers and there has been significant growth in foreign workers on New Zealand dairy farms (particularly Filipinos). Confronted by evidence of widespread lawbreaking by one of their key political constituencies and in the face of heavy lobbying (along with threats to casualise the dairying workforce) the New Zealand Government chose to weaken protections for workers. Previously, compliance with the minimum wage could be assessed on an hourly, daily or weekly basis depending on the contracts signed by the workers. A hastily drafted amendment to the Minimum Wage Order allowed assessment of the Minimum Wage over a fortnight for certain categories of workers (notably salaried workers). A longer assessment period allows employers to ‘credit’ higher payments in one week against lower payments in the next. For workers very near the minimum wage, this will almost certainly mean less pay overall. These changes make it easier for employers to make their workers undertake long hours. Along with proposed changes to remove guaranteed rest and meal breaks, they will lead to greater fatigue and more accidents. Ironically, the changes do not address the underlying issue of dairy farmers’ compliance with basic employment law. The NZCTU will continue to push for changes to the minimum wage fixing system to make it fairer, more transparent and less susceptible to lobbying. 1. The NZCTU makes a comprehensive submission on the Minimum Wage including a summary of relevant economic research each year. This is available on our website at www.union.org.nz Policy on the hoof: lobbying and minimum wage compliance in New Zealand A technical amendment to minimum wage laws may mean lower pay and longer hours for workers in the country’s largest earning export sector INTERNATIONAL union rights Page 18 Volume 21 Issue 2 2014 JEFF SISSONS is General Counsel with the New Zealand Council of Trade Unions - Te Kauae Kaimahi in Wellington and a Vice President of ICTUR N ew Zealand has a proud history in relation to the Minimum Wage. When a universal minimum wage for all sectors of the New Zealand economy in 1946, the adult minimum wage was as high as 83 percent of the average wage. In 1973, the minimum wage was 66 percent of the average wage. It dropped to as low as 27 percent in 1983, and after a significant increase to 49 percent in 1985 again was allowed to fall to below 39 percent during the 1990s. During the 2000s however it was raised significantly to approximately 50 percent of the average wage, and the lower youth minimum wage was abolished by giving young workers the same protection as adults. Studies showed that these very strong rises had no or little negative employment effect, and some positive effects. New Zealand’s unemployment rate reached a low in 2007 of 3.5 percent. However declining union and collective bargaining coverage mean that more and more workers are reliant on minimum statutory conditions . According to research published by the Center for Economic and Policy Research in November 2011 New Zealand suffered a drop of 53% in collective bargaining coverage between 1980-2010 (see Schmitt and Mitukiewicz Politics Matter: Changes in Unionisation Rates in Rich Countries, 1960-2010). Despite New Zealand’s relatively easy ride through the Global Financial Crisis, the right wing Government in power since 2008 has used economic conditions as a cover to weaken minimum...

Heterogeneous Firm Responses to Rising Teenage Wages

Abstract. Substantial youth minimum wage changes in New Zealand between 2000 and 2007 raised teenage average wages by 5–10 per cent relative to those for adults. We use Statistics New Zealand's Linked Employer–Employee Database (LEED) to examine whether firms' teenage labour demand responses to these changes are greater for firms with higher teenage‐employment share. We find evidence that high teen‐employers reduced their teen employment relative to other firms and had lower survival rates over the period. However, firms that entered the main teen‐employment industries had higher teen‐employment shares than continuing firms. The results are consistent with endogenous technology adoption in response to non‐marginal changes in relative wages.

Retail jobs in the Netherlands: Low pay in a context of long‐term wage moderation

Abstract.Wage moderation has been at the heart of the Netherlands' model of socio‐economic governance since the 1980s. Low‐paid employment has grown significantly, lower wages being constrained by declining minimum wages. Lagging incomes and consumption have depressed demand in retail, whose workforce – especially young people – accepted low‐paid, part‐time jobs. Low pay tends to reduce job quality – a phenomenon which has been heightened by the exceptionally long tail of youth minimum wages and the education grant system allowing students to work and skewing the labour market against young full‐time jobseekers. The current crisis may thwart retail's budding re‐professionalization.

Long-Term Impact of Youth Minimum Wages: Evidence from Two Decades of Individual Longitudinal Data

This paper quantifies the long-run impact of exposure to youth minimum wages and sheds light on its mechanisms. It uses remarkable longitudinal data spanning for twenty years and explores legislative changes that define groups of teenagers exposed for different durations. After controlling for the contemporaneous impact of the minimum wage, its long-run impact translates into: an overall wage premium, consistent with an upgrading in the quality of jobs offered; a flatter tenure-earnings profile, consistent with lower initial investment in firm-specific training. Interestingly, the overall wage premium increases with exposure and the tenure-earnings profile is flatter the longer the exposure.

Minimum wage effects on educational enrollments in New Zealand

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.

Impact of the Minimum Wage on Expected Profits

This paper investigates the impact of a significant reform to the youth minimum wage in New Zealand in 2001, on the expectations of low wage employers’ profits. In March 2001, the eligibility for adult minimum wage rates was lowered from 20 to 18 years while the youth minimum wage for 16–17 year olds was also increased from 60 to 70% of the adult minimum wage. We construct a descriptive profile of minimum wage workers in New Zealand and their industry membership. We find that most minimum wage workers in New Zealand predominantly work in the four industry sectors; (1) Retail, (2) Textile and apparel, (3) Accommodation, cafes and restaurants, and (4) Agriculture, forestry, and fishing. Next using an event study methodology we examine the economic impact of the substantial increase in youth minimum wage rates on employers in industries with high concentrations of minimum wage workers. Surprisingly, all conclusions point to there being an insignificant impact on profit expectations for low wage employers by investors.

Youth minimum wage reform and the labour market in New Zealand

This paper analyses the effects of a large reform in the minimum wages affecting youth workers in New Zealand since 2001. Prior to this reform, a youth minimum wage, applying to 16–19 year-olds, was set at 60% of the adult minimum. The reform had two components. First, it lowered the eligible age for the adult minimum wage from 20 to 18 years, and resulted in a 69% increase in the minimum wage for 18 and 19 year-olds. Second, the reform raised the youth minimum wage in two annual steps from 60% to 80% of the adult minimum, and resulted in a 41% increase in the minimum wage for 16 and 17 year-olds over a two-year period. We estimate the impact of this reform by comparing average outcomes for these two groups of teenagers, before and after the change, to those for 20–25 year-olds, who were unaffected by the reform. We find no evidence of adverse effects on youth employment immediately following the reform, but some weak evidence of employment loss by 2003. We also find evidence of a 10–20% increase in hours worked following the reform for employed 16–17 year-olds, and up to a 10% increase for employed 18–19 year-olds, depending on the specification adopted. Combined, wage, hours, and employment changes lead to significant increases in labour earnings and total income of teenagers relative to young adults. However, we also find evidence of a decline in educational enrolment, and an increase in unemployment, inactivity, and benefit receipt rates, suggesting that while the minimum wage reform increased the labour supply of teenagers, this increase was not matched by as large an increase in employment.

Youth Minimum Wage Reform and the Labour Market

This paper analyses the effects of a large reform in the minimum wages affecting youth workers in New Zealand since 2001. Prior to this reform, a youth minimum wage, applying to 16-19 year-olds, was set at 60% of the adult minimum. The reform had two components. First, it lowered the eligible age for the adult minimum wage from 20 to 18 years, and resulted in a 69 percent increase in the minimum wage for 18 and 19 year-olds. Second, the reform raised the youth minimum wage in two annual steps from 60% to 80% of the adult minimum, and resulted in a 41 percent increase in the minimum wage for 16 and 17 year-olds over a two-year period. We use data from the New Zealand Household Labour Force Survey (HLFS) to estimate the impact of these changes on a variety of labour market and related outcomes. We compare the average outcomes of these two groups of teenagers, before and after the policy reform, to those of 20-25 year-olds, who were unaffected by the reform. We find no robust evidence of adverse effects on youth employment or hours worked. In fact, we find stronger evidence of positive employment responses to the changes for both groups of teenagers, and that 16-17 year-olds increased their hours worked by 10-15 percent following the minimum wage changes. Given the absence of any adverse employment effects, we find significant increases in labour earnings and total income of teenagers relative to young adults. However, we do find some evidence of a decline in educational enrolment, and an increase in unemployment and inactivity, although these results depend on the specification adopted.

Disentangling the Minimum Wage Puzzle: An Analysis of Worker Accessions and Separations

Changes in the legislation in the mid-1980s in Portugal provide remarkably good conditions for analysis of the employment effects of mandatory minimum wages, as the minimum wage increased sharply for a very specific group of workers. Relying on a matched employer– employee panel data set, we model gross worker flows—accessions and separations—in continuing firms, as well as in new firms and those going out of business, using a count regression model applied to proportions. Employment trends for teenagers, the affected group, are contrasted to those of older workers before and after the raise in the youth minimum wage. The major effect on teenagers of a rising minimum wage has been the reduction of separations from the employer, which, during the period under analysis, has compensated for the reduction of accessions to new and continuing firms. In this sense, our results can reconcile some of the previous evidence in the empirical literature when analyzing the aggregate impact of the minimum wage on youth employment without decomposing it by type of worker flow. (JEL: D21, J23, J38)

Coût du travail et emploi des jeunes

It is sometimes said that, in France, the extent of relative youth unemployment is due to the fact that there are no institutional methods, without considering the wide range of unemployment policies, that would enable to disconnect youth labour cost from adult labour cost. Such a disconnection may appear to be necessary in order to compensate for lower productivity, stemming from inexperience and a lack of training. The aim of this study is to give some elements to evaluate the macro- economic effects on may expect from a lowering of youth labour cost through a youth minimum wage or a specific reduction of employer's social contributions for young employed persons. Going through the theorical and empirical littérature gives the impression of a lot of uncertainties : empirical studies do not give precise answers to problems that are not solved by the theory regarding the impacts on employment and youth employment of the minimum wage. Empirical studies, curried out upon both North America and France, show results having poor robustness or even contradictory conclusions, especially concerning the present period. The present evaluation relies on the hypothesis of an elasticity of substitution between production factors (labour, capital but also between categories of the working population) equals to one. Our results confirm that the impact of both measures could be large as far as employment is concerned. Even if there is no massive solution to the nowadays worrying situation of the labour market, it seems that employment, especially youth employment, should be strongly stimulated. However, our results indicate that the total number of job creations is always less numerous than that of job creations for young persons. It means that the studied policies, even if they may improve the youth labour market, may have be detrimental for the adult labour market which would face job destructions.

Youth Minimum Wage Rates: The Dutch Experience

Legal minimum wage rates for young workers were introduced in The Netherlands in 1974. After substantial increases during the 1970s, youth minimum wages were lowered in the 1980s, in response to the large increase of youth unemployment. Analyses the employment effects of lowering youth minimum wages. Looks at macro and micro evidence. At the macro level, does not find convincing evidence of negative effects of youth minimum wages on youth employment. Constructs a micro model in which an individual′s labour market state can be affected by the sign of potential earnings minus the relevant minimum wage. The model is estimated with data from 1984 and 1987. Finds significant minimum wage elasticities of employment and unemployment, with expected signs.

An Analysis of Teenage Employment by Firms, 1999-2007

Changes to youth minimum wage legislation in New Zealand together with steady increases in minimum wages since 2001 have contributed to substantial increases in the minimum wages for teenage workers, and significant increases in the number of teen workers earning at or near minimum wages. With these changes as a backdrop, this paper uses data from Statistics New Zealand’s Linked Employer-Employee Database (LEED) to document the pattern of firm-level teenage employment over the period 2000-2007, and analyse the responses of firms to the increasing relative wages of teen workers.