Minimum Wages and Youth Employment: Evidence from the Finnish Retail Trade Sector
Labor Institute for Economic Research Discussion Paper No. 238
29 Pages Posted: 21 Dec 2007
Date Written: December 19, 2007
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.
Keywords: Minimum wages, employment, labour demand
JEL Classification: J31, J51
Suggested Citation: Suggested Citation