Minimum Wages, Labor Market Institutions, and Youth Employment: A Cross-National Analysis

38 Pages Posted: 15 Sep 2003

See all articles by William Wascher

William Wascher

Board of Governors of the Federal Reserve System

David Neumark

University of California, Irvine - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Date Written: March 2003

Abstract

We estimate the employment effects of changes in national minimum wages using a pooled cross-section time-series data set comprising 17 OECD countries for the period 1975-2000, focusing on the impactof cross-country differences in minimum wage systems and in otherlabor market institutions and policies that may either offset or amplify the effects of minimum wages. The average minimum wage effects we estimate using this sample are consistent with the view that minimum wages cause employment losses among youths. However, the evidence also suggests that the employment effects of minimum wages vary considerably across countries. In particular, disemployment effects of minimum wages appear to be smaller in countries that have subminimum wage provisions for youths. Regarding other labor market policies and institutions, we find that more restrictive labor standards and higher union coverage strengthen the disemployment effects of minimum wages, while employment protection laws and active labor market policies designed to bring unemployed individuals into the work force help to offset these effects. Overall, the disemployment effects of minimum wages are strongest in the countries with the least regulated labor markets.

Keywords: Minimum wages, youth employment, labor market institutions

JEL Classification: J23, J38

Suggested Citation

Wascher, William and Neumark, David, Minimum Wages, Labor Market Institutions, and Youth Employment: A Cross-National Analysis (March 2003). Available at SSRN: https://ssrn.com/abstract=419822 or http://dx.doi.org/10.2139/ssrn.419822

William Wascher (Contact Author)

Board of Governors of the Federal Reserve System ( email )

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David Neumark

University of California, Irvine - Department of Economics ( email )

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