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Minimum Wages, Labor Market Institutions, and Youth Employment: A Cross-National Analysis

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  • David Neumark
  • William Wascher

Abstract

The authors estimate the employment effects of changes in national minimum wages using a pooled cross-section time-series data set comprising 17 OECD countries for the period 1975–2000. The average effects they find are consistent with the view that minimum wages cause employment losses among youths. However, the evidence also shows considerable variation across countries. In particular, disemployment effects of minimum wages appear to be smaller in countries that have subminimum wage provisions for youths. Regarding other labor market policies and institutions, the authors find that more restrictive labor standards and higher union coverage strengthen the disemployment effects of minimum wages, while employment protection laws and active labor market policies designed to bring unemployed individuals into the work force help to offset these effects. Overall, the disemployment effects of minimum wages are strongest in the countries with the least regulated labor markets.

Suggested Citation

  • David Neumark & William Wascher, 2004. "Minimum Wages, Labor Market Institutions, and Youth Employment: A Cross-National Analysis," ILR Review, Cornell University, ILR School, vol. 57(2), pages 223-248, January.
  • Handle: RePEc:sae:ilrrev:v:57:y:2004:i:2:p:223-248
    DOI: 10.1177/001979390405700204
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    1. 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.
    2. 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.
    3. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages 1-33, March.
    4. David Neumark & William Wascher, 1992. "Employment Effects of Minimum and Subminimum Wages: Panel Data on State Minimum Wage Laws," ILR Review, Cornell University, ILR School, vol. 46(1), pages 55-81, October.
    5. Stephen Machin & Alan Manning, 1994. "The Effects of Minimum Wages on Wage Dispersion and Employment: Evidence from the U.K. Wages Councils," ILR Review, Cornell University, ILR School, vol. 47(2), pages 319-329, January.
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