Abstract
The literature review covers scholarly literature from twelve countries, examining the impact of minimum wages on youth employment, schooling and training. It was conducted by a sizeable team of specialist reviewers, which included country experts external who acted as advisers to the review team.
The size of employment effects from the introduction of or increases in minimum wages for young people in general are extremely small and on the margins of statistical significance in the great majority of studies surveyed. The employment elasticity for 16-17 year-olds in 2003 in Hyslop and Stillman (2007), in their New Zealand study was -0.1 to -0.2, a typical result for those studies arguing that a significant effect exists. There is some evidence that negative employment effects where they exist may disappear as the worker ages.
The impact of minimum wages upon the youth labour market is more likely to be negative where there is no separate subminimum (minima) for younger workers as for example in Spain.
There is some evidence that the very small employment impacts can be mitigated and in some cases be positive if the subminimum rate is set at the appropriate level. The prudent approach taken by the UK LPC might be seen as helpful in mitigating the effect of youth minimum wages on employment.
There is also some evidence that increases in 16-17 year old rates do have some effect on the extent of their employment as shown in several studies reviewed.
Where wide support exists in society for minimum wages, employers rarely take advantage of suspensions of minimum wages for younger workers even when given the opportunity to do so as shown in the Finnish case.
The method by which the minimum wage is set is relevant, with systems which set rates by collective bargaining less likely to experience negative employment effects.
Minimum wages for young people may also have a less negative or indeed nil impact where there are strong labour market interventions by Government to support employment for young workers.
There is only a relatively small literature on effects on schooling. In the UK and the USA, there is very little evidence that minimum wages for 16-17 year olds have exerted a negative influence on continued school participation. The legal school minimum leaving age is an important determinant of continued participation.
There are contradictory estimates of the effect of minimum wages on training, partly because effects are very small
The size of employment effects from the introduction of or increases in minimum wages for young people in general are extremely small and on the margins of statistical significance in the great majority of studies surveyed. The employment elasticity for 16-17 year-olds in 2003 in Hyslop and Stillman (2007), in their New Zealand study was -0.1 to -0.2, a typical result for those studies arguing that a significant effect exists. There is some evidence that negative employment effects where they exist may disappear as the worker ages.
The impact of minimum wages upon the youth labour market is more likely to be negative where there is no separate subminimum (minima) for younger workers as for example in Spain.
There is some evidence that the very small employment impacts can be mitigated and in some cases be positive if the subminimum rate is set at the appropriate level. The prudent approach taken by the UK LPC might be seen as helpful in mitigating the effect of youth minimum wages on employment.
There is also some evidence that increases in 16-17 year old rates do have some effect on the extent of their employment as shown in several studies reviewed.
Where wide support exists in society for minimum wages, employers rarely take advantage of suspensions of minimum wages for younger workers even when given the opportunity to do so as shown in the Finnish case.
The method by which the minimum wage is set is relevant, with systems which set rates by collective bargaining less likely to experience negative employment effects.
Minimum wages for young people may also have a less negative or indeed nil impact where there are strong labour market interventions by Government to support employment for young workers.
There is only a relatively small literature on effects on schooling. In the UK and the USA, there is very little evidence that minimum wages for 16-17 year olds have exerted a negative influence on continued school participation. The legal school minimum leaving age is an important determinant of continued participation.
There are contradictory estimates of the effect of minimum wages on training, partly because effects are very small
| Original language | English |
|---|---|
| Place of Publication | London |
| Publisher | The Low Pay Commission |
| Number of pages | 147 |
| Publication status | Published - 31 Mar 2011 |
| Externally published | Yes |