Research | Funded Projects

MINIMUM WAGES AND YOUTH EMPLOYMENT

Although there have been many many studies of the impact of the minimum wage on employment, and, in particular, on the employment of young people, low skilled workers and women, there does not appear to be any consistency in the results. Broadly speaking one might suggest that, for the most part, effects of MW on youth employment tend to be small and negative. On the other hand, there is quite a lot of evidence – albeit with a substantial amount of heterogeneity in the results – which suggest that minimum wages do raise personal and household income levels and thus can have an impact on poverty. Broadly speaking since the effects on employment are – on average negative but small – it is not unreasonable to conclude that the damaging effects of the minimum wage are outweighed by its positive effects on average.But, it can also be argued that such broad brush conclusions rather miss the point. It is of interest precisely where and why the minimum wage does not significantly damage the employment prospects of young people and whether, for example, this is because the MW creates a shift in the skills composition of the young employed (or indeed in the informal and formal sector) or whether there is little or no effect on existing employment patterns. These are empirical questions which are only now starting to be asked. Certainly the importance of the interaction between minimum wages and other labour market institutions has been recognised; as yet, however, very few studies have convincingly argued the case – apart from on disputed methodological grounds - for why minimum wages appear to have differential effects in different circumstances. Two exceptions are the papers by Neumark & Wascher (2004) and Boockmann (2010) identified above. More work needs to be done, however, if we wish to understand the role of interactions, also looking at the cross-country differences in wage and income effects, not just employment. The purpose of this research project is to analyse these quesitons in the framework of meta-analyses of employment and wage outcomes for young people explicitly taking into account the role of the interactioon with other labour market institutions likely to affect the impact of minimum wages.