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National Minimum Wage and Employment of Young Workers in the UK

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  • Jan Fidrmuc
  • J. D. Tena

Abstract

We analyze the impact of the UK national minimum wage (NMW) on the employment of young workers. The previous literature found little evidence of an adverse impact of the NMW on the UK labor market. We focus on the age-related increases in the NMW at 18 and 22 years of age. Using regression discontinuity design, we fail to find any effect of turning 22. However, we find a significant and negative employment effect for male workers at 21, which we believe to be an anticipation effect. We also find a negative effect for both genders upon turning 18. The age-related NMW increases may have an adverse effect on employment of young workers, with this effect possibly occurring already well in advance of reaching the threshold age.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4286.

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Date of creation: 2013
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Handle: RePEc:ces:ceswps:_4286

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Keywords: minimum wage; employment; young workers; regression discontinuity design;

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References

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  1. Rohlin, Shawn M., 2011. "State minimum wages and business location: Evidence from a refined border approach," Journal of Urban Economics, Elsevier, vol. 69(1), pages 103-117, January.
  2. Yingying Dong, 2011. "Jumpy or Kinky? Regression Discontinuity without the Discontinuity," Working Papers 111207, University of California-Irvine, Department of Economics.
  3. David S. Lee & Thomas Lemieux, 2009. "Regression Discontinuity Designs in Economics," NBER Working Papers 14723, National Bureau of Economic Research, Inc.
  4. Dickens, Richard & Machin, Stephen & Manning, Alan, 1999. "The Effects of Minimum Wages on Employment: Theory and Evidence from Britain," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 17(1), pages 1-22, January.
  5. David S. Lee & David Card, 2006. "Regression Discontinuity Inference with Specification Error," NBER Technical Working Papers 0322, National Bureau of Economic Research, Inc.
  6. Arulampalam, Wiji & Booth, Alison L. & Bryan, Mark L., 2002. "Work-Related Training and the New National Minimum Wage in Britain," IZA Discussion Papers 595, Institute for the Study of Labor (IZA).
  7. Card, David & Krueger, Alan B, 1994. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania," American Economic Review, American Economic Association, American Economic Association, vol. 84(4), pages 772-93, September.
  8. Imbens, Guido W. & Lemieux, Thomas, 2008. "Regression discontinuity designs: A guide to practice," Journal of Econometrics, Elsevier, Elsevier, vol. 142(2), pages 615-635, February.
  9. Edward C. Norton & Hua Wang & Chunrong Ai, 2004. "Computing interaction effects and standard errors in logit and probit models," Stata Journal, StataCorp LP, StataCorp LP, vol. 4(2), pages 154-167, June.
  10. Mark B. Stewart, 2004. "The employment effects of the national minimum wage," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 114(494), pages C110-C116, 03.
  11. David Card & Carlos Dobkin & Nicole Maestas, 2008. "The Impact of Nearly Universal Insurance Coverage on Health Care Utilization: Evidence from Medicare," American Economic Review, American Economic Association, American Economic Association, vol. 98(5), pages 2242-58, December.
  12. Brian A. Jacob & Lars Lefgren, 2002. "Remedial Education and Student Achievement: A Regression-Discontinuity Analysis," NBER Working Papers 8918, National Bureau of Economic Research, Inc.
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Cited by:
  1. Ganong, Peter & J├Ąger, Simon, 2014. "A Permutation Test and Estimation Alternatives for the Regression Kink Design," IZA Discussion Papers 8282, Institute for the Study of Labor (IZA).

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