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Abstract
Most overseas studies on the minimum wage examine labour market outcomes among teenagers, because they are believed to be the age group most likely to experience any associated reductions in employment. However, teenagers in New Zealand were not covered by a minimum wage until March 1994. We examine data through the end of 1993 to see if the adult minimum wage had different labour market effects on young adults aged 20 to 24, compared to our “control group” of exempt teenagers. We estimate that a 10 percent increase in the minimum wage reduces the employment of all young adults by 3.5 percent, and increases their unemployment rate by 3.5 percentage points. The same increase in the minimum wage reduces the employment of all young adults without school or post‐school qualifications by 5.7 percent, and increases their unemployment rate by 6.5 percentage points. Furthermore, we find the opposite effects among teenagers. A 10 percent increase in the adult minimum wage increases the employment of teenagers by 6.9 percent and reduces their unemployment rate by 3.0 percentage points.
Notes
Department of Economics, University of Auckland