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A Cross-National Analysis of the Effects of Minimum Wages on Youth Employment

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  • David Neumark
  • William Wascher

Abstract

We estimate the employment effects of changes in national minimum wages using a pooled cross-section time-series data set comprising sixteen OECD countries for the period 1975-1997. We pay particular attention to the impact of cross-country differences in minimum wage systems and in other labor market institutions and policies that may either reduce or amplify the effects of minimum wages. Overall, our results generally are consistent with the view that minimum wages cause employment losses among youth. However, the evidence also suggests that the employment effects of minimum wages vary considerably across countries. Disemployment effects of minimum wages appear to be smaller when there are subminimum wages for youths, while, in the longer run at least, minimum wages set by collective bargaining may entail more deleterious employment effects. We also find that government policies restricting employers' ability to adjust nonpecuniary characteristics of jobs (such as hours restrictions or work rules) tend to exacerbate the negative effects of minimum wages on youth employment, while countries with active labor market policies designed to bring non-employed individuals into the work force tend to exhibit smaller disemployment effects from minimum wages.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7299.

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Date of creation: Aug 1999
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Publication status: published as Neumark, David and William Wascher. "Minimum Wages, Labor Market Institutions, And Youth Employment: A Cross-National Analysis," Industrial and Labor Relations Review, 2004, v57(2,Jan), 223-248.
Handle: RePEc:nbr:nberwo:7299

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  1. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
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  3. David Neumark & William Wascher, 1995. "Reconciling the evidence on employment effects of minimum wages: a review of our research findings," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 95-53, Board of Governors of the Federal Reserve System (U.S.).
  4. David Neumark & William Wascher, 1992. "Employment effects of minimum and subminimum wages: Panel data on state minimum wage laws," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 46(1), pages 55-81, October.
  5. Stephen Machin & Alan Manning, 1992. "Minimum Wages," CEP Discussion Papers dp0080, Centre for Economic Performance, LSE.
  6. Soest, A.H.O. van, 1994. "Youth minimum wage rates: The Dutch experience," Discussion Paper, Tilburg University, Center for Economic Research 1994-22, Tilburg University, Center for Economic Research.
  7. Sanders Korenman & David Neumark, 2000. "Cohort Crowding and Youth Labor Markets (A Cross-National Analysis)," NBER Chapters, in: Youth Employment and Joblessness in Advanced Countries, pages 57-106 National Bureau of Economic Research, Inc.
  8. Di Tella, Rafael & MacCulloch, Robert, 2005. "The consequences of labor market flexibility: Panel evidence based on survey data," European Economic Review, Elsevier, vol. 49(5), pages 1225-1259, July.
  9. Baker, Michael & Benjamin, Dwayne & Stanger, Shuchita, 1999. "The Highs and Lows of the Minimum Wage Effect: A Time-Series Cross-Section Study of the Canadian Law," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 17(2), pages 318-50, April.
  10. Dolado, Juan J. & Felgueroso, Florentino & Jimeno, Juan F., 1997. "The effects of minimum bargained wages on earnings: Evidence from Spain," European Economic Review, Elsevier, vol. 41(3-5), pages 713-721, April.
  11. D. E. Moggridge, 1995. "Comment," History of Political Economy, Duke University Press, vol. 27(5), pages 87-91, Supplemen.
  12. David Card, 1991. "Do Minimum Wages Reduce Employment? A Case Study of California, 1987-89," NBER Working Papers 3710, National Bureau of Economic Research, Inc.
  13. Richardson, S., 1998. "Who Gets Minimum Wages?," CEPR Discussion Papers 386, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  14. A. W. Coats, 1995. "Comment," History of Political Economy, Duke University Press, vol. 27(5), pages 157-161, Supplemen.
  15. Burkhauser, Richard V & Couch, Kenneth A & Wittenburg, David C, 2000. "A Reassessment of the New Economics of the Minimum Wage Literature with Monthly Data from the Current Population Survey," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 18(4), pages 653-80, October.
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Cited by:
  1. Sachverständigenrat zur Begutachtung der Gesamtwirtschaftlichen Entwicklung (ed.), 2006. "Arbeitslosengeld II reformieren: Ein zielgerichtetes Kombilohnmodell. Expertise im Auftrag des Bundesministers für Wirtschaft und Technologie," Occasional Reports / Expertisen, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung, number 75364.
  2. Angel-Urdinola, Diego F. & Kuddo, Arvo, 2010. "Key characteristics of employment regulation in the Middle East and North Africa," Social Protection Discussion Papers 55674, The World Bank.
  3. Jean-Louis Guérin & Julien Genet & Loïc Cadiou, 2002. "Évolutions démographiques et marché du travail : des liens complexes parfois contradictoires," Économie et Statistique, Programme National Persée, vol. 355(1), pages 139-156.
  4. Dolado, Juan J. & Felgueroso, Florentino & Jimeno, Juan F., 2000. "The Role of the Minimum Wage in the Welfare State: An Appraisal," IZA Discussion Papers 152, Institute for the Study of Labor (IZA).
  5. Andrea Bassanini & Romain Duval, 2006. "The Determinants of Unemployment across OECD Countries," Post-Print halshs-00120584, HAL.
  6. Dario Sciulli & Marcello Signorelli, 2010. "University-to-work transitions: the case of Perugia," Quaderni del Dipartimento di Economia, Finanza e Statistica, Università di Perugia, Dipartimento Economia, Finanza e Statistica 77/2010, Università di Perugia, Dipartimento Economia, Finanza e Statistica.
  7. Cecil Mlatsheni & Sandrine Rospabé, 2002. "An Analysis of the Spatial Distribution of the Clothing and Textile Industry in SADC," Working Papers, University of Cape Town, Development Policy Research Unit 02065, University of Cape Town, Development Policy Research Unit.
  8. Francine D. Blau & Lawrence M. Kahn, 2003. "Understanding International Differences in the Gender Pay Gap," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 21(1), pages 106-144, January.
  9. Olga Demidova & Marcello Signorelli, 2010. "The Impact of Crises on Youth Unemployment of Russian Regions: An Empirical Analysis," Quaderni del Dipartimento di Economia, Finanza e Statistica, Università di Perugia, Dipartimento Economia, Finanza e Statistica 78/2010, Università di Perugia, Dipartimento Economia, Finanza e Statistica.
  10. Cristiano Perugini & Marcello Signorelli, 2010. "Youth labour market performance in European regions," Economic Change and Restructuring, Springer, vol. 43(2), pages 151-185, May.
  11. Schröder, Lena, 2004. "The role of youth programmes in the transition from school to work," Working Paper Series, IFAU - Institute for Evaluation of Labour Market and Education Policy 2004:5, IFAU - Institute for Evaluation of Labour Market and Education Policy.

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