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

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  • Claus Thustrup Kreiner

    (University of Copenhagen, CEBI, and CEPR)

  • Daniel Reck

    (London School of Economics)

  • Peer Ebbesen Skov

    (Auckland University of Technology and RFF)

Abstract

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.

Suggested Citation

  • Claus Thustrup Kreiner & Daniel Reck & Peer Ebbesen Skov, 2020. "Do Lower Minimum Wages for Young Workers Raise Their Employment? Evidence from a Danish Discontinuity," The Review of Economics and Statistics, MIT Press, vol. 102(2), pages 339-354, May.
    • Handle: RePEc:tpr:restat:v:102:y:2020:i:2:p:339-354
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    More about this item

    JEL classification:

    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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