Heterogeneous Firm Responses to Rising Teenage Wages

Proceedings of the Australian Fair Pay Commission Research Forum, December 2008

Posted: 18 Dec 2009

See all articles by Dean Hyslop

Dean Hyslop

Motu Economic and Public Policy Research

Steven Stillman

Free University of Bozen-Bolzano; IZA Institute of Labor Economics

David C. Maré

Motu Economic and Public Policy Research Trust; University of Waikato - Economics

Jason Craig Timmins

Motu Economic and Public Policy Research Trust - Department of Labour

Date Written: December 1, 2008

Abstract

This paper uses data from Statistics New Zealand’s Linked Employer-Employee Database (LEED) to document the pattern of firm-level teenage employment over the period 2000–2007, and analyse the responses of firms to the increasing relative wages of teenage workers, against a backdrop of substantial increases in the minimum wages for teenage workers. First, these increases plausibly raised average teenage wages by 5-10percent relative to adult workers. Although the effect on a typical firm’s wage bill is small: about 0.5percent on average and about 1.5percent for firms in the main teenage-employing industries, the average impact for a significant fraction of high teenage-employing firms could be about 5 per cent.

Second, among continuing firms, we find mixed evidence whether high initial teenage-employers reduced their teenage employment relative to other firms over the period. Analysing changes over the period as a whole, we estimate that initial high teenage-employing firms reduced their subsequent teenage employment by 2.5-3 percentage points for firms in the main teenage-employing industries, and about 1.2 percentage points for firms in other industries. However, analysing annual changes, we find small and insignificant effects for firms in the main teenage-employing industries and positive effects for firms in other industries.

Third, we find preliminary evidence that firms with high levels of teenage employment at the beginning of the period had lower survival rates; firms in the main (other) teenage-employing industries with initial teenage-employment shares greater than 0.3, had about a 3percent (10 percent) lower survival rate than other firms. We also estimate that firms entering the main teenage-employing industries during the period had about 2 per cent higher teenage-employment shares in the final year of the period than continuing firms.

Keywords: Wages, Teenagers, Heterogenous responses, Firms, Minimum wage

JEL Classification: C01, D21, D63

Suggested Citation

Hyslop, Dean R. and Stillman, Steven and Maré, David C. and Timmins, Jason Craig, Heterogeneous Firm Responses to Rising Teenage Wages (December 1, 2008). Proceedings of the Australian Fair Pay Commission Research Forum, December 2008, Available at SSRN: https://ssrn.com/abstract=1524556

Dean R. Hyslop (Contact Author)

Motu Economic and Public Policy Research ( email )

Level 1, 93 Cuba Street
P.O. Box 24390
Wellington, 6142
New Zealand

Steven Stillman

Free University of Bozen-Bolzano ( email )

Via Sernesi 1
39100 Bozen-Bolzano (BZ), Bozen 39100
Italy

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

David C. Maré

Motu Economic and Public Policy Research Trust ( email )

PO Box 24390
Wellington, 6021
New Zealand
64-4-9394250 (Phone)

HOME PAGE: http://www.motu.org.nz

University of Waikato - Economics

New Zealand

Jason Craig Timmins

Motu Economic and Public Policy Research Trust - Department of Labour ( email )

PO Box 3705
Wellington
New Zealand
64-4-9154397 (Phone)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
360
PlumX Metrics