Youth Minimum Wage Reform and the Labour Market

Dean Hyslop and Steven Stillman

No 1091, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper analyses the effects of a large reform in the minimum wages affecting youth workers in New Zealand since 2001. Prior to this reform, a youth minimum wage, applying to 16-19 year-olds, was set at 60% of the adult minimum. The reform had two components. First, it lowered the eligible age for the adult minimum wage from 20 to 18 years, and resulted in a 69 percent increase in the minimum wage for 18 and 19 year-olds. Second, the reform raised the youth minimum wage in two annual steps from 60% to 80% of the adult minimum, and resulted in a 41 percent increase in the minimum wage for 16 and 17 year-olds over a two-year period. We use data from the New Zealand Household Labour Force Survey (HLFS) to estimate the impact of these changes on a variety of labour market and related outcomes. We compare the average outcomes of these two groups of teenagers, before and after the policy reform, to those of 20-25 year-olds, who were unaffected by the reform. We find no robust evidence of adverse effects on youth employment or hours worked. In fact, we find stronger evidence of positive employment responses to the changes for both groups of teenagers, and that 16-17 year-olds increased their hours worked by 10-15 percent following the minimum wage changes. Given the absence of any adverse employment effects, we find significant increases in labour earnings and total income of teenagers relative to young adults. However, we do find some evidence of a decline in educational enrolment, and an increase in unemployment and inactivity, although these results depend on the specification adopted.

Keywords: difference-in-differences; minimum wage; New Zealand; natural experiment (search for similar items in EconPapers)
JEL-codes: J22 J23 J24 J38 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2004-03
New Economics Papers: this item is included in nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Published - published in: Labour Economics, 2007, 14 (2), 201-230

Downloads: (external link)
https://docs.iza.org/dp1091.pdf (application/pdf)

Related works:
Working Paper: Youth Minimum Wage Reform and the Labour Market (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp1091

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().