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Minimum wages and youth employment: Evidence from the Finnish retail trade sector

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  • Böckerman, Petri
  • Uusitalo, Roope

Abstract

Following an agreement between the trade unions and the employer organisations, Finnish employers could pay less than the existing minimum wage for young workers between 1993 and 1995. We examine the effects of these minimum wage exceptions by comparing the changes in wages and employment of the groups whose minimum wages were reduced with simultaneous changes among slightly older workers for whom the minimum wage regulation was still binding. Our analysis is based on the payroll record data and minimum wage agreements from the retail trade sector over the period 1990-2005. We discover that average wages in the eligible group declined only modestly despite the fact that the excess supply of labour during high unemployment should make it relatively easy to attract workers even with low wages. The minimum wage exceptions had no positive effects on employment.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 6113.

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Date of creation: 05 Dec 2007
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Handle: RePEc:pra:mprapa:6113

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Keywords: Labour demand; employment; minimum wages; trade unions;

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References

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  1. Portugal, Pedro & Cardoso, Ana Rute, 2002. "Disentangling the Minimum Wage Puzzle: An Analysis of Worker Accessions and Separations," IZA Discussion Papers 544, Institute for the Study of Labor (IZA).
  2. Pereira, Sonia C., 2003. "The impact of minimum wages on youth employment in Portugal," European Economic Review, Elsevier, vol. 47(2), pages 229-244, April.
  3. David Neumark & William Wascher, 2006. "Minimum Wages and Employment: A Review of Evidence from the New Minimum Wage Research," NBER Working Papers 12663, National Bureau of Economic Research, Inc.
  4. Lawrence F. Katz & Alan B. Krueger, 1992. "The Effect of the Minimum Wage on the Fast Food Industry," NBER Working Papers 3997, National Bureau of Economic Research, Inc.
  5. John M. Abowd & Francis Kramarz & Thomas Lemieux & David N. Margolis, 2000. "Minimum Wages and Youth Employment in France and the United States," NBER Chapters, in: Youth Employment and Joblessness in Advanced Countries, pages 427-472 National Bureau of Economic Research, Inc.
  6. Richard Layard & Stephen Nickell, 1998. "Labour Market Institutions and Economic Performance," CEP Discussion Papers dp0407, Centre for Economic Performance, LSE.
  7. Skedinger, Per, 2007. "The Design and Effects of Collectively Agreed Minimum Wages: Evidence from Sweden," Working Paper Series 700, Research Institute of Industrial Economics.
  8. Falk, Armin & Fehr, Ernst & Zehnder, Christian, 2005. "The Behavioral Effects of Minimum Wages," IZA Discussion Papers 1625, Institute for the Study of Labor (IZA).
  9. Skedinger, Per, 2006. "Minimum wages and employment in Swedish hotels and restaurants," Labour Economics, Elsevier, vol. 13(2), pages 259-290, April.
  10. Petri Böckerman & Roope Uusitalo, 2006. "Erosion of the Ghent System and Union Membership Decline: Lessons from Finland," British Journal of Industrial Relations, London School of Economics, vol. 44(2), pages 283-303, 06.
  11. Ilmakunnas, Pekka & Maliranta, Mika, 2001. "The Turnover of Jobs and Workers in a Deep Recession: Evidence from the Finnish Business Sector," Discussion Papers 747, The Research Institute of the Finnish Economy.
  12. Mark B. Stewart & Joanna K. Swaffield, 2002. "Using the BHPS Wave 9 Additional Questions to Evaluate the Impact of the National Minimum Wage," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 64(s1), pages 633-652, 08.
  13. repec:fth:prinin:298 is not listed on IDEAS
  14. Brown, Charles & Gilroy, Curtis & Kohen, Andrew, 1982. "The Effect of the Minimum Wage on Employment and Unemployment," Journal of Economic Literature, American Economic Association, vol. 20(2), pages 487-528, June.
  15. Hyslop, Dean & Stillman, Steven, 2007. "Youth minimum wage reform and the labour market in New Zealand," Labour Economics, Elsevier, vol. 14(2), pages 201-230, April.
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Cited by:
  1. Skedinger, Per, 2011. "Effects of Increasing Minimum Wages on Employment and Hours: Evidence from Sweden’s Retail Sector," Working Paper Series 869, Research Institute of Industrial Economics.

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