Tuesday, 4 December 2012

Heterogeneous Firm Responses to Rising Teenage Wages

an article by Dean R. Hyslop, David C. Maré, Steven Stillman and Jason Timmins (Victoria University of Wellington, New Zealand) published in LABOUR Volume 26 Issue 4 (December 2012)

Abstract

Substantial youth minimum wage changes in New Zealand between 2000 and 2007 raised teenage average wages by 5-10 per cent relative to those for adults.

We use Statistics New Zealand’s Linked Employer-Employee Database (LEED) to examine whether firms’ teenage labour demand responses to these changes are greater for firms with higher teenage-employment share.

We find evidence that high teen-employers reduced their teen employment relative to other firms and had lower survival rates over the period.

However, firms that entered the main teen-employment industries had higher teen-employment shares than continuing firms. The results are consistent with endogenous technology adoption in response to non-marginal changes in relative wages.

JEL classifications: J21, J23, J31, J38


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