Estimating Employment Impacts with Binding Minimum Wage Constraints

16 Pages Posted: 13 Nov 2011  

Gail Pacheco

Auckland University of Technology - School of Business and Economics

Date Written: December 2011

Abstract

This article examines the impact of rising minimum wages on employment in New Zealand over the time period 1986–2004. Detailed wage data from Statistics New Zealand allows the construction of predicted probabilities for each individual in the sample being affected by a rising minimum wage, and hence finding the wage floor binding. These probabilities are then interacted with the real minimum wage level in the employment regressions to ensure analysis is restricted to the individuals most at risk when the minimum wage is raised. Comparing results before and after using these binding constraints in the regressions reveal significant negative employment effects of a higher minimum wage.

JEL Classification: J08, J38

Suggested Citation

Pacheco, Gail, Estimating Employment Impacts with Binding Minimum Wage Constraints (December 2011). Economic Record, Vol. 87, Issue 279, pp. 587-602, 2011. Available at SSRN: https://ssrn.com/abstract=1958462 or http://dx.doi.org/10.1111/j.1475-4932.2011.00722.x

Gail Pacheco (Contact Author)

Auckland University of Technology - School of Business and Economics ( email )

3 Wakefield Street
Private Bag 92006
Auckland Central 1020
New Zealand
+64 9 917-9999 Ext. 5708 (Phone)
+64 9 917-9990 (Fax)

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