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

Abstract

Following an agreement between the trade unions and the employer organizations in 1993, Finnish employers could temporarily pay less than the existing minimum wage for young workers. 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 wages remained unchanged. Our analysis is based on payroll record data and minimum wage agreements from the retail trade sector. The results show that average wages in the eligible group declined only modestly. We find no significant effects on employment.

Wage Policies and the Integration of Immigrants

“…20 One Nordic study on the employment effects of minimum wages, Sauramo and Solttila (1985), is not included in Table 3, since it is written in Finnish (in which we lack proficiency). According to the working paper version of Böckerman and Uusitalo (2009), the study finds no negative effects on youth employment. Eliasson and Nordström Skans (2014) are not studying minimum wages in a strict sense but examine the employment effects of a one-shot increase in collectively agreed wages for a selected group of low-wage workers.…”

“…This is also manifested by the fact that there are few observations of individuals "affected" by changes in minimum wages in the data set, resulting in little statistical power. Böckerman and Uusitalo (2009) examine a natural policy experiment in Finland, in which subminimum wages for youth in the retail sector were introduced on a temporary basis. 21 The finding is that both the decrease in minimum wages and the subsequent increase were associated with a decline in employment for youth.…”

“…Employers may also be concerned that a decreased minimum wage would be associated with adverse effects on worker morale and effort. Accordingly, Böckerman and Uusitalo (2009) report low take-up rates of the Finnish temporary subminimum wage for youth. A survey of Swedish employers by Lundborg and Skedinger (2016) as well as experimental evidence in Eriksson et al (2017) also suggest that quite large minimum wage reductions are required before employers are prepared to hire more immigrants.…”

Sweden: A Minimum Wage Model in Need of Modification

“…Böckerman and Uusitalo (2007) examine the effects of temporary exceptions to minimum wage regulations in Finland in 1993-95 and find that they had no employment-increasing effects in the retail sector. Apparently, few employers used the opportunity to pay subminimum wages to young workers made possible by the exceptions.…”

Everything and nothing changes: Fast-food employers and the threat to minimum wage regulation in Ireland

“…Similarly, the neoliberal British Conservative governments from 1979 used the 'reduction in employment' argument to justify a restriction of the scope of the Wages Councils from 1986 and then their almost complete abolition in 1993, removing minimum wage protection for approximately 10% of the active labour force (Deakin and Wilkinson, 2005). However, there is evidence that minimum wages do not have a significant negative impact on employment and can have positive effects (Böckerman and Uusitalo, 2009;Card and Krueger, 1995;Deakin and Green, 2009;Deakin and Wilkinson, 2005;Rubery, 1997;Wilkinson, 1983). In relation to the impact of overtime rates and Sunday premiums set by JLCs, the evidence on the earnings of JLC workers does not support the employers' argument.…”