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Minimum Wages: Do They Really Hurt Young People?

Author

Listed:
  • Galán Sofía

    (Banco de España, Alcala 48, 28014 Madrid, Spain)

  • Puente Sergio

    (Banco de España, Alcala 48, 28014 Madrid, Spain)

Abstract

This paper uses a significant increase in the minimum wage in Spain between 2004 and 2010 as a case study to analyse the effects on the individual probability of losing employment, using a large panel of social security records. We show that this individual approach is important, as the possible effects for different types of individuals may differ from other estimates in the literature, based on aggregate or firm-level data, hence complementing them. Our main finding is that older people experienced the largest increase in the probability of losing their job, when compared with other age groups, including young people. The intuition is simple: among the affected (low-productivity) workers, young people are expected to increase their productivity more than older ones, who are in the flat part of their life-cycle productivity curve. Consequently, an employer facing a uniform increase in the minimum wage may find it profitable to retain young employees and to fire older ones.

Suggested Citation

  • Galán Sofía & Puente Sergio, 2015. "Minimum Wages: Do They Really Hurt Young People?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 15(1), pages 299-328, January.
    • Handle: RePEc:bpj:bejeap:v:15:y:2015:i:1:p:30:n:8
    DOI: 10.1515/bejeap-2013-0171
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    References listed on IDEAS

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    1. Card, David & Krueger, Alan B, 1994. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania," American Economic Review, American Economic Association, vol. 84(4), pages 772-793, September.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. [経済]最低賃金引き上げは若者より高年齢層にとって損
      by himaginary in himaginaryの日記 on 2012-12-09 14:00:00
    2. Minimum wage increases hurt the old, not the young
      by Economic Logician in Economic Logic on 2012-11-23 21:34:00

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    Cited by:

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    5. Sergio Puente, 2019. "Efficiency vs. Equity: Does This Trade-Off Hold for Minimum Wage Policy?," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 16(04), pages 27-30, January.
    6. McGuinness, Seamus & Redmond, Paul & Delaney, Judith, 2019. "The prevalence and effect on hours worked of the minimum wage in Ireland: A sectoral and regional analysis," Research Series, Economic and Social Research Institute (ESRI), number RS93.
    7. Arni, Patrick & Eichhorst, Werner & Pestel, Nico & Spermann, Alexander & Zimmermann, Klaus F., 2014. "Kein Mindestlohn ohne unabhängige wissenschaftliche Evaluation," IZA Standpunkte 65, Institute of Labor Economics (IZA).

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    More about this item

    Keywords

    minimum wage; labour demand; firing;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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