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Minimum Wages and Employment: Reconsidering the Use of a Time-Series Approach as an Evaluation Tool

Author

Listed:
  • Lee, Wang-Sheng

    (Monash University)

  • Suardi, Sandy

    (La Trobe University)

Abstract

The time-series approach used in the minimum wage literature essentially aims to estimate a treatment effect of increasing the minimum wage. In this paper, we employ a novel approach based on aggregate time-series data that allows us to determine if minimum wage changes have significant effects on employment. This involves the use of tests for structural breaks as a device for identifying discontinuities in the data which potentially represent treatment effects. In an application based on Australian data, the tentative conclusion is that the introduction of minimum wage legislation in Australia in 1997 and subsequent minimum wage increases appear not to have had any significant negative employment effects for teenagers.

Suggested Citation

  • Lee, Wang-Sheng & Suardi, Sandy, 2010. "Minimum Wages and Employment: Reconsidering the Use of a Time-Series Approach as an Evaluation Tool," IZA Discussion Papers 4748, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp4748
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    References listed on IDEAS

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    Cited by:

    1. Patrick Belser & Uma Rani, 2015. "Minimum wages and inequality," Chapters, in: Janine Berg (ed.), Labour Markets, Institutions and Inequality, chapter 5, pages 123-146, Edward Elgar Publishing.
    2. 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.
    3. James Bishop, 2018. "The Effect of Minimum Wage Increases on Wages, Hours Worked and Job Loss," RBA Research Discussion Papers rdp2018-06, Reserve Bank of Australia.
    4. Martin O'Brien & Raymond Markey & Eduardo Pol, 2018. "The Short Run Impact of Penalty Rate Cuts on Employment Outcomes in Retail and Hospitality Sectors in Australia," Economic Papers, The Economic Society of Australia, vol. 37(3), pages 270-286, September.
    5. Artur Sikora, 2021. "The minimum wage in Poland and its connection to unemployment: Evaluating causality," Zeszyty Naukowe Małopolskiej Wyższej Szkoły Ekonomicznej w Tarnowie / The Malopolska School of Economics in Tarnow Research Papers Collection, Malopolska School of Economics in Tarnow, vol. 50(2), pages 65-77, June.

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    More about this item

    Keywords

    teenage employment; structural break; minimum wage;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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