Employee Age and Experience as Determinants on New Firm Survival: Evidence from Turkish Matched Employer–Employee Data

The employment effect of a minimum-wage increase depends on the wage-setting power of employers. The empirical literature, however, has measured this power only indirectly, through labor-market concentration. In this paper, we estimate firm-level product markups and wage markdowns for Turkish manufacturing firms using the Entrepreneur Information System (EIS) administrative micro-data. We show that a firm’s initial markdown predicts the sign and magnitude of its direct employment response to minimum-wage increases, including the exceptionally large January 2016 increase (33% nominal, ≈25% real). At minimum-wage firms with no markdown, employment falls year after year. At high-markdown firms that face the same wage floor, employment does not fall. The monopsony model can explain this difference, whereas the competitive model predicts employment losses for both groups of firms. Among firms paying the minimum wage, employment growth increases with the initial markdown in every year over 2013–2019: conditional on sector-year and province-year effects, high-markdown minimum-wage firms grow 6 to 9 log points faster annually than zero-markdown firms paying the same wage.