The Impact of the 2008 Youth Minimum Wage Reform in New Zealand (2021)
We examine the impact of a policy reform in New Zealand that abolished the youth minimum wage for 16-17 year-old workers and resulted in a 28% increase in the real value of the minimum wage for this group using a difference-in-differences analysis where we compare changes in outcomes over time for 16-17 year-olds relative to 20-21 year-olds allowing for potential spillovers to 18-19 year-olds. We first show that, at the time of the reform, minimum wages were substantially binding for 16-17 year-olds. We find no evidence of adverse employment effects immediately following the policy change in 2008, but conclude that it lowered the employment rate of 16-17 year-olds by 3-6 percentage points in the subsequent two years, and resulted in substitution towards 18-19 year-olds. These effects were mostly borne by students: in fact, the employment rate among non-students increased; in addition, there was no increase in 16-17 year-olds’ unemployment, and their overall inactivity rate decreased following 2008. Overall, we find that this large minimum wage increase had fairly small adverse effects and primarily impacted marginally attached workers suggesting that increasing minimum wages are unlikely to cause large employment losses in most circumstances
Keywordsdifference-in-differences; natural experiment; New Zealand; Minimum Wage
ANZSRC Fields of Research14 - Economics
RightsCreative Commons Attribution 4.0 International
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