The authors 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. The average effects they find are consistent with the view that minimum wages cause employment losses among youths. However, the evidence also shows considerable variation 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, the authors 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.
Get full access to this article
View all access options for this article.
References
1.
AbowdJohnKramarzFrancisLemieuxThomasMargolisDavid. 2000. “Minimum Wages and Youth Employment in France and the United States.” In BlanchflowerDavidFreemanRichard, eds., Youth Employment and Unemployment in Advanced Countries. Chicago: University of Chicago Press, pp. 427–72.
2.
ArellanoManuelBondStephen. 1991. “Some Tests of Specification for Panel Data: Monte-Carlo Evidence and an Application to Employment Equations.”Review of Economic Studies, Vol. 58, No. 2, pp. 277–97.
3.
BakerMichaelBenjaminDwayneStangerShuchita. 1999. “The Highs and Lows of the Minimum Wage Effect: A Time Series-Cross Section Study of the Canadian Law.”Journal of Labor Economics, Vol. 17, No. 2, pp. 318–50.
4.
BazenStephenSkouriasNicolas. 1997. “Is There a Negative Effect of Minimum Wages in France?”European Economic Review, Vol. 41, No. 3–5, pp. 723–32.
5.
BentolilaSamuelBertolaGiuseppe. 1990. “Firing Costs and Labour Demand: How Bad Is Eurosclerosis?”Review of Economic Studies, Vol. 57, No. 3, pp. 381–402.
6.
BertolaGiuseppe. 1990. “Job Security, Employment, and Wages.”European Economic Review, Vol. 34, No. 4, pp. 851–79.
7.
BlanchardOlivierWolfersJustin. 2000. “The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence.”Economic Journal, Vol. 110, No. 462, pp. C1–C33.
8.
BlauFrancine D.KahnLawrence M., 1996. “International Differences in Male Wage Inequality: Institutions versus Market Forces.”Journal of Political Economy, Vol. 104, No. 4, pp. 791–837.
9.
CardDavidKruegerAlan. 1995. Myth and Measurement: The New Economics of the Minimum Wage. Princeton, N.J.: Princeton University Press.
10.
ChappieS.1997. “Do Minimum Wages Have an Adverse Impact on Employment? Evidence from New Zealand.”Labour Market Bulletin, Vol. 2, pp. 25–50.
11.
CoeDavid T.SnowerDennis J., 1997. “Policy Complementarities: The Case for Fundamental Labor Market Reform.”IMF Staff Papers, Vol. 44, No. 1, pp. 1–35.
12.
Di TeliaRafaelMacCullochRobert. Forthcoming. “The Consequences of Labour Market Flexibility: Panel Evidence Based on Survey Data.”European Economic Review.
13.
DoladoJuanFelguerosoFlorentinoJimenoJan. 1997. “The Effects of Minimum Bargained Wages on Earnings: Evidence from Spain.”European Economic Review, Vol. 41, No. 3–5, pp. 713–21.
14.
DoladoJuanKramarzFrancisMachinStephenManningAlanMargolisDavidTeulingsCoen. 1996. “The Economic Impact of Minimum Wages in Europe.”Economic Policy, Vol. 23 (October), pp. 319–70.
15.
European Commission. 1998. Minimum Wages in 1997—A Comparative Study. Luxembourg: Office for Official Publications of the European Communities.
16.
HamermeshDaniel. 2002. “International Labor Economics.”Journal of Labor Economics, Vol. 20, No. 4, pp. 709–32.
17.
HausmanJerry. 1978. “Specification Tests in Econometrics.”Econometrica, Vol. 46, No. 6, pp. 1251–71.
18.
KahnLawrence M.2000. “Wage Inequality, Collective Bargaining, and Relative Employment from 1985 to 1994: Evidence from Fifteen OECD Countries.”Review of Economics and Statistics, Vol. 82, No. 4, pp. 564–79.
19.
KorenmanSandersNeumarkDavid. 2000. “Cohort Crowding and Youth Labor Markets: A Cross-National Analysis.” In BlanchflowerDavidFreemanRichard, eds., Youth Employment and Unemployment in Advanced Countries. Chicago: University of Chicago Press, pp. 57–105.
20.
LazearEdward P.1990. “Job Security Provisions and Employment.”Quarterly Journal of Economics, Vol. 105, No. 3, pp. 699–726.
21.
MachinStephenManningAlan. 1994. “The Effects of Minimum Wages on Wage Dispersion and Employment: Evidence from the U.K. Wage Councils.”Industrial and Labor Relations Review, Vol. 47, No. 2, pp. 319–29.
22.
MachinStephenManningAlan. 1996. “Employment and the Introduction of a Minimum Wage in Britain.”Economic Journal, Vol. 106, No. 436, pp. 667–76.
23.
MachinStephenManningAlan. 1997. “Minimum Wages and Economic Outcomes in Europe.”European Economic Review, Vol. 41, No. 3–5, pp. 733–42.
24.
MaloneyT.1995. “Does the Adult Minimum Wage Affect Employment and Unemployment in New Zealand?”New Zealand Economic Papers, Vol. 1, pp. 1–19.
25.
MareD.1995. “Comments on Maloney.” Unpublished paper, New Zealand Department of Labour.
26.
MinfordP.AshtonP., 1996. “Minimum Wages: A Macroeconomic Assessment.” Unpublished paper, University of Liverpool.
27.
NeumarkDavidWascherWilliam. 1992. “Employment Effects of Minimum and Subminimum Wages: Panel Data on State Minimum Wage Laws.”Industrial and Labor Relations Review, Vol. 46, No. 1, pp. 55–81.
28.
NeumarkDavidWascherWilliam. 1996. “Reconciling the Evidence on Employment Effects of Minimum Wages: A Review of Our Research Findings.” In RostersMarvin, ed., The Effects of Minimum Wages on Employment. Washington, D.C.: American Enterprise Institute, pp. 55–86.
29.
NickellStephen. 1981. “Biases in Dynamic Models with Fixed Effects.”Econometrica, Vol. 49, No. 6, pp. 1417–26.
30.
NickellStephen. 1997. “Unemployment and Labor Market Rigidities: Europe versus North America.”Journal of Economic Perspectives, Vol. 11, No. 3, pp. 55–74.
31.
NickellStephenNunziataLuca. 2001. “Labour Market Institutions Database.” Unpublished paper, Centre for Economic Performance, London School of Economics.
32.
Organisation for Economic Co-operation and Development. 1994. The OECD Jobs Study: Evidence and Explanations, Part II: The Adjustment Potential of the Labour Market. Paris: OECD.
33.
Organisation for Economic Co-operation and Development. 1996. Employment Outlook. Paris: OECD.
34.
Organisation for Economic Co-operation and Development. 1998. Employment Outlook. Paris: OECD.
35.
Organisation for Economic Co-operation and Development. 1999. Employment Outlook. Paris: OECD.
36.
Organisation for Economic Co-operation and Development. 2001. Labour Force Statistics, 1980–2000. Paris: OECD.
37.
PereiraSonia C.2003. “The Impact of Minimum Wages on Youth Employment in Portugal.”European Economic Review, Vol. 47, No. 2, pp. 229–44.
38.
PortugalPedroCardosoAna Rute. 2002. “Disentangling the Minimum Wage Puzzle: An Analysis of Worker Accessions and Separations.” Discussion Paper No. 544, Institute for the Study of Labor (IZA).
39.
ScarpettaStefano. 1996. “Assessing the Role of Labour Market Policies and Institutional Settings on Unemployment: A Cross-Country Study.”OECD Economic Studies, Vol. 26, pp. 43–98.
40.
SiebertHorst. 1997. “Labor Market Rigidities: At the Root of Unemployment in Europe.”Journal of Economic Perspectives, Vol. 11, No. 1, pp. 37–54.
41.
United Kingdom Low Pay Commission. 2001. The National Minimum Wage: Third Report. London: Low Pay Commission.
42.
United States Department of State. 2001. Country Reports on Human Rights Practices. Washington, D.C.: Government Printing Office.
43.
Van SoestA.1994. “Youth Minimum Wage Rates: The Dutch Experience.”International Journal of Manpower, Vol. 15, No. 2, pp. 100–17.
