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The Effects of Dutch Youth Minimum Wage Increases on Income Inequality

Author

Listed:
  • Koen Steenks

    (Vrije Universiteit Amsterdam)

  • Arjan Heyma

    (SEO Amsterdam Economics)

  • Tobias Vervliet

    (SEO Amsterdam Economics)

Abstract

This study employs increases in the Dutch Youth Minimum Wage (YMW) in 2017 and 2019 for certain age groups as a natural experiment to examine the impact of changes in minimum wages on income inequality through the employment-channel. Using the Difference-in-Difference (DiD) and Two-Stage Least Squares (2SLS) methods, it estimates the effects of YMW increases on hourly wages and working hours across various income segments. These effects are then used to simulate the monthly income distribution after the YMW increases in 2017 and 2019. This way, a comparative analysis is conducted between the observed income distribution prior to the YMW increases and the simulated income distribution thereafter, focusing on the aspect of income inequality. The findings reveal distinct effects based on the magnitude of the wage increase. Modest increases (for individuals aged 18–19) and substantial increases (for individuals aged 20–22 in 2017 and 20–21 in 2019) both generate spike and spillover effects, influencing individuals earning hourly wages up to at least 120% of the new minimum wage. Small increases reduce working hours for higher-income individuals, while larger increases negatively affect working hours for middle-income earners (100–150% of the new YMW) but benefit those earning below 100% and above 150% of the new threshold. Overall, both small and large YMW increases contribute to income redistribution by altering wages and working hours.

Suggested Citation

  • Koen Steenks & Arjan Heyma & Tobias Vervliet, 2025. "The Effects of Dutch Youth Minimum Wage Increases on Income Inequality," De Economist, Springer, vol. 173(2), pages 299-330, July.
    • Handle: RePEc:kap:decono:v:173:y:2025:i:2:d:10.1007_s10645-025-09451-z
    DOI: 10.1007/s10645-025-09451-z
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    More about this item

    Keywords

    Minimum wage; Income inequality; Difference-in-difference; Two-stage least squares;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J48 - Labor and Demographic Economics - - Particular Labor Markets - - - Particular Labor Markets; Public Policy
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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