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Minimum wages and youth employment: Evidence from the Finnish retail trade sector

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  • Böckerman, Petri
  • Uusitalo, Roope

Abstract

Following an agreement between the trade unions and the employer organisations, Finnish employers could pay less than the existing minimum wage for young workers between 1993 and 1995. We examine the effects of these minimum wage exceptions by comparing the changes in wages and employment of the groups whose minimum wages were reduced with simultaneous changes among slightly older workers for whom the minimum wage regulation was still binding. Our analysis is based on the payroll record data and minimum wage agreements from the retail trade sector over the period 1990-2005. We discover that average wages in the eligible group declined only modestly despite the fact that the excess supply of labour during high unemployment should make it relatively easy to attract workers even with low wages. The minimum wage exceptions had no positive effects on employment.

Suggested Citation

  • Böckerman, Petri & Uusitalo, Roope, 2007. "Minimum wages and youth employment: Evidence from the Finnish retail trade sector," MPRA Paper 6113, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:6113
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    References listed on IDEAS

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    Cited by:

    1. Arindrajit Dube & Attila S. Lindner, 2024. "Minimum Wages in the 21st Century," NBER Working Papers 32878, National Bureau of Economic Research, Inc.
    2. Giupponi, Giulia & Machin, Stephen, 2022. "Company wage policy in a low-wage labor market," LSE Research Online Documents on Economics 117983, London School of Economics and Political Science, LSE Library.
    3. Benzarti, Youssef & Harju, Jarkko, 2021. "Can payroll tax cuts help firms during recessions?," Journal of Public Economics, Elsevier, vol. 200(C).
    4. Petri Böckerman & Seppo Laaksonen & Jari Vainiomäki, 2010. "Micro and Macro Level Wage Rigidity: Lessons from Finland," Finnish Economic Papers, Finnish Economic Association, vol. 23(1), pages 27-42, Spring.
    5. Claus Thustrup Kreiner & Daniel Reck & Peer Ebbesen Skov, 2020. "Do Lower Minimum Wages for Young Workers Raise Their Employment? Evidence from a Danish Discontinuity," The Review of Economics and Statistics, MIT Press, vol. 102(2), pages 339-354, May.
    6. Thomas Turner & Michelle O’Sullivan, 2013. "Economic Crisis and the Restructuring of Wage Setting Mechanisms for Vulnerable Workers in Ireland," The Economic and Social Review, Economic and Social Studies, vol. 44(2), pages 197-219.
    7. Per Skedinger, 2010. "Sweden: A Minimum Wage Model in Need of Modification," Chapters, in: Daniel Vaughan-Whitehead (ed.), The Minimum Wage Revisited in the Enlarged EU, chapter 12, Edward Elgar Publishing.
    8. Skedinger, Per, 2011. "Effects of Increasing Minimum Wages on Employment and Hours: Evidence from Sweden’s Retail Sector," Working Paper Series 869, Research Institute of Industrial Economics.
    9. Böckerman, Petri & Juuti, Toni & Kosonen, Tuomas & Keränen, Henri, 2024. "Are Firms Willing to Pay Lower Wages? A Quasi-Experiment on Subminimum Wage Policy," Working Papers 169, VATT Institute for Economic Research.

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    More about this item

    Keywords

    Labour demand; employment; minimum wages; trade unions;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

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