IDEAS home Printed from https://ideas.repec.org/p/iza/izadps/dp13982.html
   My bibliography  Save this paper

The Impact of Age-Specific Minimum Wages on Youth Employment and Education: A Regression Discontinuity Analysis

Author

Listed:
  • Dayioglu-Tayfur, Meltem

    (Middle East Technical University)

  • Kucukbayrak, Muserref

    (Central Bank of Turkey)

  • Tumen, Semih

    (Amazon)

Abstract

We exploit an age-specific minimum wage rule – which sets a lower minimum wage for workers of age 15 than that for workers of age 16 and above in Turkey – and its abolition to estimate the causal effect of a minimum wage increase on youth employment and education. Using a regression discontinuity design in tandem with a difference-in-discontinuities analysis, we find that increasing the minimum wage substantially reduces the employment of young males. In terms of magnitudes, the employment probability declines by 2.5-3.1 percentage points at the 16-year-old age cut-off. Moreover, the probability of unemployment increases approximately 2 percentage points. We also document that the minimum wage hike does not generate a major change in high school enrollment, while the likelihood of transitioning into "neither in employment nor in education and training" (NEET) category notably increases among young males. We argue that the effects of the policy have mostly been driven by the demand-side forces rather than the supply side.

Suggested Citation

  • Dayioglu-Tayfur, Meltem & Kucukbayrak, Muserref & Tumen, Semih, 2020. "The Impact of Age-Specific Minimum Wages on Youth Employment and Education: A Regression Discontinuity Analysis," IZA Discussion Papers 13982, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp13982
    as

    Download full text from publisher

    File URL: https://docs.iza.org/dp13982.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. David Neumark & William Wascher, 1995. "The Effects of Minimum Wages on Teenage Employment and Enrollment: Evidence from Matched CPS Surveys," NBER Working Papers 5092, National Bureau of Economic Research, Inc.
    2. Michael Shannon, 2011. "The Employment Effects of Lower Minimum Wage Rates for Young Workers: Canadian Evidence," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 50(4), pages 629-655, October.
    3. Card, David & Krueger, Alan B, 1994. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania," American Economic Review, American Economic Association, vol. 84(4), pages 772-793, September.
    4. Sylvia A. Allegretto & Arindrajit Dube & Michael Reich, 2011. "Do Minimum Wages Really Reduce Teen Employment? Accounting for Heterogeneity and Selectivity in State Panel Data," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 50(2), pages 205-240, April.
    5. repec:ilo:ilowps:486283 is not listed on IDEAS
    6. Matias D. Cattaneo & Michael Jansson & Xinwei Ma, 2020. "Simple Local Polynomial Density Estimators," Journal of the American Statistical Association, Taylor & Francis Journals, vol. 115(531), pages 1449-1455, July.
    7. Gregg, Paul & Tominey, Emma, 2005. "The wage scar from male youth unemployment," Labour Economics, Elsevier, vol. 12(4), pages 487-509, August.
    8. Sen, Anindya & Rybczynski, Kathleen & Van De Waal, Corey, 2011. "Teen employment, poverty, and the minimum wage: Evidence from Canada," Labour Economics, Elsevier, vol. 18(1), pages 36-47, January.
    9. Kerry L. Papps, 2012. "The Effects of Social Security Taxes and Minimum Wages on Employment: Evidence from Turkey," ILR Review, Cornell University, ILR School, vol. 65(3), pages 686-707, July.
    10. Claus Thustrup Kreiner & Daniel Reck & Peer Ebbesen Skov, 2020. "Do Lower Minimum Wages for Young Workers Raise Their Employment? Evidence from a Danish Discontinuity," The Review of Economics and Statistics, MIT Press, vol. 102(2), pages 339-354, May.
    11. Tumen, Semih, 2018. "The Impact of Low-Skill Refugees on Youth Education," IZA Discussion Papers 11869, Institute of Labor Economics (IZA).
    12. Sebastian Calonico & Matias D. Cattaneo & Rocio Titiunik, 2014. "Robust Nonparametric Confidence Intervals for Regression‐Discontinuity Designs," Econometrica, Econometric Society, vol. 82, pages 2295-2326, November.
    13. Pedro Portugal & Ana Rute Cardoso, 2006. "Disentangling the Minimum Wage Puzzle: An Analysis of Worker Accessions and Separations," Journal of the European Economic Association, MIT Press, vol. 4(5), pages 988-1013, September.
    14. 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.
    15. Matias D. Cattaneo & Rocío Titiunik, 2022. "Regression Discontinuity Designs," Annual Review of Economics, Annual Reviews, vol. 14(1), pages 821-851, August.
    16. Mincer, Jacob, 1976. "Unemployment Effects of Minimum Wages," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages 87-104, August.
    17. 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.
    18. Gail Pacheco, 2009. "Who are minimum and sub‐minimum wage workers?," International Journal of Manpower, Emerald Group Publishing Limited, vol. 30(6), pages 529-548, September.
    19. van Soest, A.H.O., 1994. "Youth minimum wage rates : The Dutch experience," Discussion Paper 1994-22, Tilburg University, Center for Economic Research.
    20. William Maloney & Jairo Mendez, 2004. "Measuring the Impact of Minimum Wages. Evidence from Latin America," NBER Chapters, in: Law and Employment: Lessons from Latin America and the Caribbean, pages 109-130, National Bureau of Economic Research, Inc.
    21. Hatice Burcu Gurcihan Yunculer & Caglar Yunculer, 2016. "Minimum Wage Effects on Labor Market Outcomes in Turkey," Working Papers 1614, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    22. World Bank, 2009. "Female Labor Force Participation in Turkey : Trends, Determinants and Policy Framework," World Bank Publications - Reports 13249, The World Bank Group.
    23. Dale Belman & Paul J. Wolfson, 2014. "What Does the Minimum Wage Do?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number wdmwd, November.
    24. Maria Marimpi & Pierre Koning, 2018. "Youth minimum wages and youth employment," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 7(1), pages 1-18, December.
    25. Selin Pelek, 2015. "The Employment Effect of the Minimum Wage: An Empirical Analysis From Turkey," Ekonomi-tek - International Economics Journal, Turkish Economic Association, vol. 4(1), pages 49-68, January.
    26. A. Colin Cameron & Douglas L. Miller, 2015. "A Practitioner’s Guide to Cluster-Robust Inference," Journal of Human Resources, University of Wisconsin Press, vol. 50(2), pages 317-372.
    27. Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, vol. 32(3), pages 385-397, August.
    28. Fiszbein, Ariel, 1992. "Do workers in the informal sector benefit from cuts in the minimum wage?," Policy Research Working Paper Series 826, The World Bank.
    29. Richard Dickens & Rebecca Riley & David Wilkinson, 2014. "The UK minimum wage at 22 years of age: a regression discontinuity approach," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 177(1), pages 95-114, January.
    30. Henderson, Joanna L. & Hawke, Lisa D. & Chaim, Gloria, 2017. "Not in employment, education or training: Mental health, substance use, and disengagement in a multi-sectoral sample of service-seeking Canadian youth," Children and Youth Services Review, Elsevier, vol. 75(C), pages 138-145.
    31. Imbens, Guido W. & Lemieux, Thomas, 2008. "Regression discontinuity designs: A guide to practice," Journal of Econometrics, Elsevier, vol. 142(2), pages 615-635, February.
    32. Gorry, Aspen, 2013. "Minimum wages and youth unemployment," European Economic Review, Elsevier, vol. 64(C), pages 57-75.
    33. Lemos, Sara, 2009. "Minimum wage effects in a developing country," Labour Economics, Elsevier, vol. 16(2), pages 224-237, April.
    34. Andrew Gelman & Guido Imbens, 2019. "Why High-Order Polynomials Should Not Be Used in Regression Discontinuity Designs," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 37(3), pages 447-456, July.
    35. Acemoglu, Daron, 2001. "Good Jobs versus Bad Jobs," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 1-21, January.
    36. Sebastian Calonico & Matias D. Cattaneo & Max H. Farrell & Roc ́ıo Titiunik, 2017. "rdrobust: Software for regression-discontinuity designs," Stata Journal, StataCorp LP, vol. 17(2), pages 372-404, June.
    37. Del Carpio,Ximena Vanessa & Pabon,Laura M., 2017. "Implications of minimum wage increases on labor market dynamics lessons for emerging economies," Policy Research Working Paper Series 8030, The World Bank.
    38. Stephanie O. Crofton & William L. Anderson & Emily C. Rawe, 2009. "Do Higher Real Minimum Wages Lead to More High School Dropouts? Evidence from Maryland Across Races, 1993–2004," American Journal of Economics and Sociology, Wiley Blackwell, vol. 68(2), pages 445-464, April.
    39. Lee, David S. & Card, David, 2008. "Regression discontinuity inference with specification error," Journal of Econometrics, Elsevier, vol. 142(2), pages 655-674, February.
    40. Ozturk, Orgul, 2006. "Employment Effects of Minimum Wages in Inflexible Labor Markets," MPRA Paper 8016, University Library of Munich, Germany, revised 2008.
    41. David Lam, 2014. "Youth bulges and youth unemployment," IZA World of Labor, Institute of Labor Economics (IZA), pages 1-26, May.
    42. Hahn, Jinyong & Todd, Petra & Van der Klaauw, Wilbert, 2001. "Identification and Estimation of Treatment Effects with a Regression-Discontinuity Design," Econometrica, Econometric Society, vol. 69(1), pages 201-209, January.
    43. Tito Boeri & Pietro Garibaldi & Marta Ribeiro, 2011. "The Lighthouse Effect And Beyond," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 57, pages 54-78, May.
    44. Pacheco, Gail A. & Cruickshank, Amy A., 2007. "Minimum wage effects on educational enrollments in New Zealand," Economics of Education Review, Elsevier, vol. 26(5), pages 574-587, October.
    45. Uma RANI & Patrick BELSER & Martin OELZ & Setareh RANJBAR, 2013. "Minimum wage coverage and compliance in developing countries," International Labour Review, International Labour Organization, vol. 152(3-4), pages 381-410, December.
    46. Grimshaw, Damian., 2014. "At work but earning less : trends in decent pay and minimum wages for young people," ILO Working Papers 994862833402676, International Labour Organization.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Claudia Petrescu & Bogdan Voicu & Christin Heinz-Fischer & Jale Tosun, 2024. "Conceiving of and politically responding to NEETs in Europe: a scoping review," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-13, December.
    2. Redmond, Paul & Staffa, Elisa & McGuinness, Seamus & Gilmore, Oisín, 2023. "Sub-minimum wages in Ireland," Research Series, Economic and Social Research Institute (ESRI), number RS167, September.
    3. Hristos Doucouliagos & Katarina Zigova, 2024. "Minimum Wages and Human Capital Investment: A Meta-Regression Analysis," Economics of Education Working Paper Series 0219, University of Zurich, Department of Business Administration (IBW).
    4. Siobhan Lucey & Maria Grydaki, 2023. "University attendance and academic performance: Encouraging student engagement," Scottish Journal of Political Economy, Scottish Economic Society, vol. 70(2), pages 180-199, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wiljan van den Berge, 2021. "The Young Bunch: Youth Minimum Wages and Labor Market Outcomes," CPB Discussion Paper 422.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    2. Wiljan van den Berge & Emiel van Bezooijen & Anna Salomons, 2021. "The Young Bunch: Youth Minimum Wages and Labor Market Outcomes," CPB Discussion Paper 422, CPB Netherlands Bureau for Economic Policy Analysis.
    3. Emiel van Bezooijen & Wiljan van den Berge & Anna Salomons, 2024. "The Young Bunch: Youth Minimum Wages and Labor Market Outcomes," ILR Review, Cornell University, ILR School, vol. 77(3), pages 428-460, May.
    4. Haroon Bhorat & Tara Caetano & Benjamin Jourdan & Ravi Kanbur & Christopher Rooney & Benjamin Stanwix & Ingrid Woolard, 2016. "Investigating the Feasibility of a National Minimum Wage for South Africa," Working Papers 201601, University of Cape Town, Development Policy Research Unit.
    5. Fidrmuc, Jan & Tena, J. D., 2018. "UK national minimum wage and labor market outcomes of young workers," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 12, pages 1-28.
    6. Yang He & Otávio Bartalotti, 2020. "Wild bootstrap for fuzzy regression discontinuity designs: obtaining robust bias-corrected confidence intervals [Using Maimonides’ rule to estimate the effect of class size on scholastic achievemen," The Econometrics Journal, Royal Economic Society, vol. 23(2), pages 211-231.
    7. Lei Xu & Yu Zhu, 2023. "Does the employment effect of national minimum wage vary by non‐employment rate? A regression discontinuity approach," Manchester School, University of Manchester, vol. 91(1), pages 18-36, January.
    8. David Slichter, 2023. "The employment effects of the minimum wage: A selection ratio approach to measuring treatment effects," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 38(3), pages 334-357, April.
    9. Tito Boeri & Jan van Ours, 2013. "The Economics of Imperfect Labor Markets: Second Edition," Economics Books, Princeton University Press, edition 1, number 10142.
    10. Dale Belman & Paul Wolfson & Kritkorn Nawakitphaitoon, 2015. "Who Is Affected by the Minimum Wage?," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 54(4), pages 582-621, October.
    11. Blaise Melly & Rafael Lalive, 2020. "Estimation, Inference, and Interpretation in the Regression Discontinuity Design," Diskussionsschriften dp2016, Universitaet Bern, Departement Volkswirtschaft.
    12. Kelly, Elish & McGuinness, Seamus, 2017. "A study of sub-minimum wage rates for young people," Research Series, Economic and Social Research Institute (ESRI), number BKMNEXT327, September.
    13. Samutpradit, Saisawat, 2024. "Employment effects of minimum wages in a dual economy: Evidence from Thailand," Journal of Development Economics, Elsevier, vol. 168(C).
    14. Andrew McEachin & Thurston Domina & Andrew Penner, 2020. "Heterogeneous Effects of Early Algebra across California Middle Schools," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 39(3), pages 772-800, June.
    15. Mauricio Villamizar‐Villegas & Freddy A. Pinzon‐Puerto & Maria Alejandra Ruiz‐Sanchez, 2022. "A comprehensive history of regression discontinuity designs: An empirical survey of the last 60 years," Journal of Economic Surveys, Wiley Blackwell, vol. 36(4), pages 1130-1178, September.
    16. Salim Atay & Gunes A. Asik & Semih Tumen, 2024. "Impact of Graduating with Honours on Entry Wages of Economics Majors," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 86(3), pages 606-640, June.
    17. Burgherr, David, 2022. "Behavioral Responses to a Pension Savings Mandate : Quasi-experimental Evidence from Swiss Tax Data," CAGE Online Working Paper Series 645, Competitive Advantage in the Global Economy (CAGE).
    18. Işık Enes & Orhangazi Özgür & Tekgüç Hasan, 2020. "Heterogeneous effects of minimum wage on labor market outcomes: A case study from Turkey," IZA Journal of Labor Policy, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 10(1), pages 1-41, March.
    19. Nidhiya Menon & Yana van der Meulen Rodgers, 2017. "The Impact of the Minimum Wage on Male and Female Employment and Earnings in India," Asian Development Review, MIT Press, vol. 34(1), pages 28-64, March.
    20. Christelis, Dimitris & Georgarakos, Dimitris & Sanz-de-Galdeano, Anna, 2020. "The impact of health insurance on stockholding: A regression discontinuity approach," Journal of Health Economics, Elsevier, vol. 69(C).

    More about this item

    Keywords

    youth employment; age-specific minimum wages; regression discontinuity design; education;
    All these keywords.

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp13982. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Holger Hinte (email available below). General contact details of provider: https://edirc.repec.org/data/izaaade.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.