Happy Birthday, You’re Fired! The Effects of an Age-Dependent Minimum Wage on Youth Employment Flows in the Netherlands

Jan Kabátek

Melbourne Institute Working Paper Series from Melbourne Institute of Applied Economic and Social Research, The University of Melbourne

Abstract: This paper investigates the effects of the age-dependent minimum wage on youth employment flows in the Netherlands. The Dutch minimum wage for workers aged 15-23 is defined as a step-wise increasing function of a worker’s calendar age. At the age of 23, workers become eligible for the “adult” minimum wage which does not increase further. This creates an incentive for firms to discriminate against employees on the basis of their age, substituting more expensive older workers with younger ones. In order to grasp the size of these effects, I analyze monthly flows in and out of employment using administrative records for the entire youth population of the Netherlands. I account for the time remaining until workers’ next birthdays, exploiting the fact that firms are facing a sharp discontinuity in labor costs in the month when a worker turns one year older. The results show a significant increase in job separation around the time of this discontinuity: the probability of job separation increases by 1.1% in the three calendar months which are closest to a worker’s next birthday. This effect exhibits substantial heterogeneity with respect to a worker’s age, showing that young and inexperienced workers are more likely to be affected by the discontinuities. The size of the effect also varies by the sector of employment, being particularly large for supermarket employees. Job accession peaks just after workers’ birthdays, representing both entry of the workers with higher reservation wages and reemployment of the workers whose jobs are dissolved around the time of the discontinuity. Classification-J23, J31, J38, M51

Keywords: Minimum wage; age-dependency; labor market flows (search for similar items in EconPapers)
Pages: 28pp
Date: 2015-12
New Economics Papers: this item is included in nep-eur and nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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http://melbourneinstitute.unimelb.edu.au/downloads ... series/wp2015n25.pdf (application/pdf)

Related works:
Working Paper: Happy Birthday, you're Fired!: The Effects of an Age-Dependent Minimum Wage on Youth Employment Flows in the Netherlands (2016)
Working Paper: Happy Birthday, you're Fired!: The Effects of an Age-Dependent Minimum Wage on Youth Employment Flows in the Netherlands (2016)
Working Paper: Happy Birthday, You're Fired! The Effects of Age-Dependent Minimum Wage on Youth Employment Flows in the Netherlands (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:iae:iaewps:wp2015n25

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