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Minimum wages and youth employment: Evidence from the Finnish retail trade sector

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  • Böckerman, Petri
  • Uusitalo, Roope

Abstract

Following an agreement between the trade unions and the employer organisations, Finnish employers could pay less than the existing minimum wage for young workers between 1993 and 1995. We examine the effects of these minimum wage exceptions by comparing the changes in wages and employment of the groups whose minimum wages were reduced with simultaneous changes among slightly older workers for whom the minimum wage regulation was still binding. Our analysis is based on the payroll record data and minimum wage agreements from the retail trade sector over the period 1990-2005. We discover that average wages in the eligible group declined only modestly despite the fact that the excess supply of labour during high unemployment should make it relatively easy to attract workers even with low wages. The minimum wage exceptions had no positive effects on employment.

Suggested Citation

  • Böckerman, Petri & Uusitalo, Roope, 2007. "Minimum wages and youth employment: Evidence from the Finnish retail trade sector," MPRA Paper 6113, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:6113
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    References listed on IDEAS

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    1. John M. Abowd & Francis Kramarz & Thomas Lemieux & David N. Margolis, 2000. "Minimum Wages and Youth Employment in France and the United States," NBER Chapters,in: Youth Employment and Joblessness in Advanced Countries, pages 427-472 National Bureau of Economic Research, Inc.
    2. David Neumark & William Wascher, 2006. "Minimum Wages and Employment: A Review of Evidence from the New Minimum Wage Research," NBER Working Papers 12663, National Bureau of Economic Research, Inc.
    3. Skedinger, Per, 2006. "Minimum wages and employment in Swedish hotels and restaurants," Labour Economics, Elsevier, vol. 13(2), pages 259-290, April.
    4. Lawrence F. Katz & Alan B. Krueger, 1992. "The Effect of the Minimum Wage on the Fast-Food Industry," ILR Review, Cornell University, ILR School, vol. 46(1), pages 6-21, October.
    5. Nickell, Stephen & Layard, Richard, 1999. "Labor market institutions and economic performance," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 46, pages 3029-3084 Elsevier.
    6. 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.
    7. 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.
    8. 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.
    9. Skedinger, Per, 2007. "The Design and Effects of Collectively Agreed Minimum Wages: Evidence from Sweden," Working Paper Series 700, Research Institute of Industrial Economics.
    10. Stewart, Mark B & Swaffield, Joanna K, 2002. " Using the BHPS Wave 9 Additional Questions to Evaluate the Impact of the National Minimum Wage," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 64(0), pages 633-652, Supplemen.
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    15. repec:fth:prinin:298 is not listed on IDEAS
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    Cited by:

    1. Skedinger, Per, 2011. "Effects of Increasing Minimum Wages on Employment and Hours: Evidence from Sweden’s Retail Sector," Working Paper Series 869, Research Institute of Industrial Economics.
    2. Petri Böckerman & Seppo Laaksonen & Jari Vainiomäki, 2010. "Micro and Macro Level Wage Rigidity: Lessons from Finland," Finnish Economic Papers, Finnish Economic Association, vol. 23(1), pages 27-42, Spring.
    3. Thomas Turner & Michelle O’Sullivan, 2013. "Economic Crisis and the Restructuring of Wage Setting Mechanisms for Vulnerable Workers in Ireland," The Economic and Social Review, Economic and Social Studies, vol. 44(2), pages 197-219.
    4. Per Skedinger, 2010. "Sweden: A Minimum Wage Model in Need of Modification," Chapters,in: The Minimum Wage Revisited in the Enlarged EU, chapter 12 Edward Elgar Publishing.

    More about this item

    Keywords

    Labour demand; employment; minimum wages; trade unions;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

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