Young Employment, Job-Skill Composition and Minimum Wages: Evidence from a 'Natural Experiment'
AbstractEmpirically very little is known about the impact of an increase in the minimum wage of young workers on the job-skill composition. This is an important question because small (or zero) effects on teenage employment may mask a substitution of more for less-skilled teenagers. Therefore, the estimation of the elasticity of substitution between skilled and unskilled workers is required. This paper will consider the increase in the minimum wage of young workers that took place in Portugal on the 1st January, 1987. This change is of particular interest, not only because it was so large (33% in real terms) and affected a significant share of workers under 20 years old (about 20%), but also because it motivated a decrease in the wage premium earned by young skilled workers from 1.24 to 1.20. The results are consistent with the view that the minimum wage increase had some negative impact on employment of unskilled workers, the most affected group: an increase of 1% in wage induced by the increase in minimum wage reduces employment of this group of workers between 0.42% to 0.47%. Nevertheless, this negative impact was partially compensated by the substitution of more for less-skilled teenagers, because there is some evidence that the elasticity of substitution between young workers with different skills is different from zero.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by NIPE - Universidade do Minho in its series NIPE Working Papers with number 04/2008.
Date of creation: 2008
Date of revision:
Contact details of provider:
Postal: Núcleo de Investigação em Políticas Económicas, Escola de Economia e Gestão, Universidade do Minho, P-4710-057 Braga, Portugal
Phone: +351-253604510 ext 5532
Web page: http://www3.eeg.uminho.pt/economia/nipe/versao_inglesa/index_uk.htm
More information through EDIRC
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-03-01 (All new papers)
- NEP-HRM-2008-03-01 (Human Capital & Human Resource Management)
- NEP-LAB-2008-03-01 (Labour Economics)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Alexandre, Fernando & Portela, Miguel & Sá, Carla, 2008.
"Admission Conditions and Graduates' Employability,"
IZA Discussion Papers
3530, Institute for the Study of Labor (IZA).
- Natália P. Monteiro & Paulo Bastos, 2009.
"Managers and wage policies,"
NIPE Working Papers
2/2009, NIPE - Universidade do Minho.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Maria João Thompson).
If references are entirely missing, you can add them using this form.