Disentangling the Minimum Wage Puzzle: An Analysis of Worker Accessions and Separations

Abstract

Changes in the legislation in the mid-1980s in Portugal provide remarkably good conditions for analysis of the employment effects of mandatory minimum wages, as the minimum wage increased sharply for a very specific group of workers. Relying on a matched employeremployee panel data set, we model gross worker flows-accessions and separations-in continuing firms, as well as in new firms and those going out of business, using a count regression model applied to proportions. Employment trends for teenagers, the affected group, are contrasted to those of older workers before and after the raise in the youth minimum wage. The major effect on teenagers of a rising minimum wage has been the reduction of separations from the employer, which, during the period under analysis, has compensated for the reduction of accessions to new and continuing firms. In this sense, our results can reconcile some of the previous evidence in the empirical literature when analyzing the aggregate impact of the minimum wage on youth employment without decomposing it by type of worker flow.

Minimum Wages and Youth Employment: Evidence from the Finnish Retail Trade Sector

“…Either of these estimates could be interpreted as an effect of minimum wage change and the set-up can be compared with the earlier studies based on minimum wage changes affecting some particular groups (e.g. Card and Krueger 1995;Hyslop and Stillman 2007;Portugal and Cardoso 2006). Our estimates in the column 'During-Before' reveal that a minimum wage cut seems to imply a decrease in employment in the affected groups.…”

Credible Research Designs for Minimum Wage Studies

“…In this section, we describe this analysis and show that the methodology does not identify appropriate counterfactuals, as it clearly fails the falsification test that there are 43 Incidentally, NSW also fail to assess the quality of their synthetic controls in the pre-treatment period, even though such a demonstration would provide a major reason for the credibility of synthetic control estimates in the first place. 44 Perhaps least important in light of the problems above, their standard errors are certainly wrong (and probably too small). They cluster on treated state and counterfactual, but the counterfactuals share many of the same states, so they are often correlated mechanically.…”

“…44 Credible estimates would begin with using the actual synthetic control estimator and not graft di erent methods onto each other without justification. Most critically, such an approach would use the actual set of pre-treatment outcomes-which forms the very basis of a synthetic control strategy-and not residuals from another estimation.…”

Minimum wage in a deflationary economy: The Japanese experience, 1994–2003

“…where is a standard normal cdf, d i is a vector of prefecture dummies, t is a linear time trend, k is an index for individual, j is an index for worker's attributes x. Speci cally, workers are classi ed into four age groups ( 22,(23)(24)(25)(26)(27)(28)(29)(30), 31-59, 60). All parameters are allowed to vary with group j.…”