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Minimum wages: do they really hurt young people?

Author

Listed:
  • Sofía Galán

    () (Banco de España)

  • Sergio Puente

    () (Banco de España)

Abstract

We estimate the effects of a significant increase in the minimum wage in Spain between 2004 and 2010 on the individual probability of losing employment, using a large panel of social security records. Our main finding is that older people experienced the largest increase in the probability of losing their job, when compared with other age groups, including young people. The intuition is simple: among the affected (low-productivity) workers, young people are expected to increase their productivity more than older ones, who are in the flat part of their life-cycle productivity curve. Consequently, an employer facing a uniform increase in the minimum wage may find it profitable to retain young employees and to fire older ones

Suggested Citation

  • Sofía Galán & Sergio Puente, 2012. "Minimum wages: do they really hurt young people?," Working Papers 1237, Banco de España;Working Papers Homepage.
  • Handle: RePEc:bde:wpaper:1237
    as

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    File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/12/Fich/dt1237e.pdf
    File Function: First version, October 2012
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    References listed on IDEAS

    as
    1. Inmaculada Cebrián & Joaquín Pitarch & César Rodríguez & Luis Toharia, 2010. "Análisis de los efectos del aumento del salario mínimo sobre el empleo de la economía española," Revista de Economía Laboral - Spanish Journal of Labour Economics, Asociación Española de Economía Laboral - AEET, vol. 7, pages 1-38.
    2. 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, vol. 18(4), pages 653-680, October.
    3. Mulligan Casey B, 2011. "Simple Analytics and Empirics of the Government Spending Multiplier and Other "Keynesian" Paradoxes," The B.E. Journal of Macroeconomics, De Gruyter, vol. 11(1), pages 1-47, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Minimum wage increases hurt the old, not the young
      by Economic Logician in Economic Logic on 2012-11-23 21:34:00
    2. [経済]最低賃金引き上げは若者より高年齢層にとって損
      by himaginary in himaginaryの日記 on 2012-12-09 14:00:00

    Citations

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    Cited by:

    1. Paulina Broniatowska & Aleksandra Majchrowska & Zbigniew ¯ó³kiewski, 2015. "Does minimum wage reduce youth employment on regional labour markets in Poland?," Lodz Economics Working Papers 1/2015, University of Lodz, Faculty of Economics and Sociology.
    2. Arni, Patrick & Eichhorst, Werner & Pestel, Nico & Spermann, Alexander & Zimmermann, Klaus F., 2014. "Kein Mindestlohn ohne unabhängige wissenschaftliche Evaluation," IZA Standpunkte 65, Institute for the Study of Labor (IZA).

    More about this item

    Keywords

    Minimum wage; labour demand; firing;

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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