Minimum Wages Effect Youngsters Unemployment Dissertation

Minimum Wages Effect Junior Unemployment

Youth Minimum Salary Reform and the Labour Industry *

Leader Hyslop Cultural Policy Part New Zealand Treasury dean. [email protected] government. nz and Steven Stillman Labour Market Policy Group New Zealand Department of Labour steven. [email protected] dol. govt. nz

February 2004

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We thank Bill Dillingham, Sid Durbin, Jordan Hampl, Brian Johnson, Tracy Mears and Julian Wooden for conversations surrounding the background to minimum wage guidelines in New Zealand, and comments within the paper, and also seminar followers at Auckland University, the Australasian Labour Econometrics Workshop, IZA/SOLE Across the atlantic Meeting of Labor Economic analysts, Canterbury University or college, La Trobe University, the New Zealand Econometric Study Group, and Exito University of Wellington for comments. Entry to the data used in this research was provided by Statistics Fresh Zealand under conditions created to give result to the security and privacy provisions with the Statistics Take action 1975. Virtually any views expressed are the single responsibility in the authors , nor purport to symbolize those of the New Zealand Section of Time, the New Zealand Treasury, or perhaps Statistics New Zealand.

Children Minimum Salary Reform plus the Labour Market

Abstract This kind of paper analyses the effects of a huge reform inside the minimum salary affecting youth workers in New Zealand since 2001. Prior to this kind of reform, a youth lowest wage, signing up to 16-19 year-olds, was arranged at 60 per cent of the adult minimum. The reform had two pieces. First, it lowered the eligible era for the adult lowest wage by 20 to 18 years, and resulted in a 69 percent increase in the minimum wage for 18 and 19 year-olds. Second, the change raised the youth minimum wage in two annual steps via 60% to 80% of the adult lowest, and led to a 41 percent embrace the bare minimum wage for 16 and 17 year-olds over a two-year period. We use data from the Fresh Zealand Household Labour Power Survey (HLFS) to estimation the impact of the changes on a variety of labour market and related effects. We review the average results of these two groups of teens, before and after the policy change, to those of 20-25 year-olds, who were not affected by the reform. We find zero robust proof of adverse effects on youth job or hours worked. Actually we find more robust evidence of confident employment responses to the improvements for the two groups of young adults, and that 16-17 year-olds increased their several hours worked by 10-15 percent following the bare minimum wage changes. Given the absence of any adverse job effects, we discover significant increases in work earnings and total income of young adults relative to youngsters. However , we all do locate some proof of a drop in educational enrolment, and an increase in joblessness and a sedentary lifestyle, although these results depend on the specification adopted. Keywords: minimum salary, New Zealand, natural try things out, difference-in-differences JEL CODE: J38, J22, J23, J24

My spouse and i

Introduction

Till recently, it had been widely believed by economists that the imp?t of a holding wage floor, e. g. minimum salary, would decrease the employment of younger and less-skilled workers. Both simple theoretical models of competitive time markets and time-series facts on the romantic relationship between lowest wages and youth employment supported this kind of consensus (Brown, Gilroy and Kohen 1982). However , the latest empirical analysis relying on quasi-experimental evaluations of cross-

sectional and longitudinal data, particularly Card (1992) and Credit card and Krueger (1994), has failed to find adverse employment results for small or low-wage workers in the United States. The inherent complications with quasi-experimental reviews have led some experts to issue the results in these documents (Burkhauser, Lounger and Wittenburg 2000; Neumark and Wascher 2000). you Still, it seems safe to say that the general opinion has been broken and that the empirical evidence indicates, in certain circumstances, an increase in the minimum...