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A Cross-National Analysis of the Effects of Minimum Wages on Youth Employment

  • David Neumark
  • William Wascher

We estimate the employment effects of changes in national minimum wages using a pooled cross-section time-series data set comprising sixteen OECD countries for the period 1975-1997. We pay particular attention to the impact of cross-country differences in minimum wage systems and in other labor market institutions and policies that may either reduce or amplify the effects of minimum wages. Overall, our results generally are consistent with the view that minimum wages cause employment losses among youth. However, the evidence also suggests that the employment effects of minimum wages vary considerably across countries. Disemployment effects of minimum wages appear to be smaller when there are subminimum wages for youths, while, in the longer run at least, minimum wages set by collective bargaining may entail more deleterious employment effects. We also find that government policies restricting employers' ability to adjust nonpecuniary characteristics of jobs (such as hours restrictions or work rules) tend to exacerbate the negative effects of minimum wages on youth employment, while countries with active labor market policies designed to bring non-employed individuals into the work force tend to exhibit smaller disemployment effects from minimum wages.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7299.

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Date of creation: Aug 1999
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Publication status: published as Neumark, David and William Wascher. "Minimum Wages, Labor Market Institutions, And Youth Employment: A Cross-National Analysis," Industrial and Labor Relations Review, 2004, v57(2,Jan), 223-248.
Handle: RePEc:nbr:nberwo:7299
Note: LS CH
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  1. repec:dgr:kubcen:199422 is not listed on IDEAS
  2. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
  3. DiTella, Rafael & MacCulloch, Robert, 1999. "The consequences of labour market flexibility: Panel evidence based on survey data," ZEI Working Papers B 02-1999, ZEI - Center for European Integration Studies, University of Bonn.
  4. Baker, Michael & Benjamin, Dwayne & Stanger, Shuchita, 1999. "The Highs and Lows of the Minimum Wage Effect: A Time-Series Cross-Section Study of the Canadian Law," Journal of Labor Economics, University of Chicago Press, vol. 17(2), pages 318-50, April.
  5. David Card, 1991. "Do Minimum Wages Reduce Employment? A Case Study of California, 1987-89," NBER Working Papers 3710, National Bureau of Economic Research, Inc.
  6. Richardson, S., 1998. "Who Gets Minimum Wages?," CEPR Discussion Papers 386, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  7. van Soest, A.H.O., 1994. "Youth minimum wage rates : The Dutch experience," Discussion Paper 1994-22, Tilburg University, Center for Economic Research.
  8. Juan J. Dolado & Florentino Felgueroso & Juan F. Jimeno, . "The effects of minimum bargained wages on earnings: Evidence from Spain," Working Papers 97-04, FEDEA.
  9. A. W. Coats, 1995. "Comment," History of Political Economy, Duke University Press, vol. 27(5), pages 157-161, Supplemen.
  10. David Neumark & William Wascher, 1992. "Employment effects of minimum and subminimum wages: Panel data on state minimum wage laws," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 46(1), pages 55-81, October.
  11. David Neumark & William Wascher, 1995. "Reconciling the evidence on employment effects of minimum wages: a review of our research findings," Finance and Economics Discussion Series 95-53, Board of Governors of the Federal Reserve System (U.S.).
  12. Sanders Korenman & David Neumark, 1997. "Cohort Crowding and Youth Labor Markets: A Cross-National Analysis," NBER Working Papers 6031, National Bureau of Economic Research, Inc.
  13. D. E. Moggridge, 1995. "Comment," History of Political Economy, Duke University Press, vol. 27(5), pages 87-91, Supplemen.
  14. Stephen Machin & Alan Manning, 1992. "Minimum Wages," CEP Discussion Papers dp0080, Centre for Economic Performance, LSE.
  15. 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 653-80, October.
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