Disentangling the Minimum Wage Puzzle: An Analysis of Job Accessions and Separations from a Longitudinal Matched Employer-Employee Data Set

38 Pages Posted: 19 Jun 2001

See all articles by Ana Rute Cardoso

Ana Rute Cardoso

Instituto de Analisis Economico (IAE-CSIC); Barcelona Graduate School of Economics (Barcelona GSE); IZA Institute of Labor Economics

Pedro Portugal

Bank of Portugal - Research Department; New University of Lisbon; IZA Institute of Labor Economics

Date Written: June 2001

Abstract

Changes in legislation in mid-80s Portugal provide remarkable conditions for economic analysis, as the minimum wage increased very sharply for a very specific group of workers. Relying on a matched employer-employee panel dataset, we model gross job flows - accessions and separations - in continuing firms, as well as in new firms and those going out of business, using a Poisson regression model applied to proportions. Worker behavior is as well modeled. Employment trends for teenagers, the affected group, are contrasted against older workers, before and after the rise in the youth minimum wage. The major effect on teenagers of a rising minimum wage is the reduction of separations from the employer, which compensates for the reduction of accessions (to new and continuing firms) and the rising dismissals from firms closing down. Indications that job attachment for low wage youngsters rises following an increase in their minimum wage suggest the relevance of supply side factors overcoming demand forces. In this sense, our results can reconcile some of the previous evidence that has been presented in the empirical literature when analysing the overall impact of the minimum wage on youth employment without looking at its sources.

Keywords: Minimum wage, employment

JEL Classification: D21, J38

Suggested Citation

Cardoso, Ana Rute and Portugal, Pedro, Disentangling the Minimum Wage Puzzle: An Analysis of Job Accessions and Separations from a Longitudinal Matched Employer-Employee Data Set (June 2001). Available at SSRN: https://ssrn.com/abstract=274241

Ana Rute Cardoso (Contact Author)

Instituto de Analisis Economico (IAE-CSIC) ( email )

Campus UAB
Barcelona, Bellaterra 08193
Spain
3436917157 (Phone)

Barcelona Graduate School of Economics (Barcelona GSE) ( email )

Ramon Trias Fargas, 25-27
Barcelona, Barcelona 08005
Spain

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany
492283894508 (Phone)
492273894510 (Fax)

Pedro Portugal

Bank of Portugal - Research Department ( email )

Av. Almirante Reis 71, 6th
Lisbon 1150-012
Portugal
+351 21 313 0000 (Phone)
+351 21 814 3841 (Fax)

New University of Lisbon

Lisbon, 1099-085
Portugal

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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