The Young Bunch: Youth Minimum Wages and Labor Market Outcomes
Emiel van Bezooijen, Wiljan van den Berge, Anna Salomons
ILR Review 77(3), 428–460
Abstract
The Netherlands sets a separate, age-graded statutory minimum wage for young workers, with sizeable jumps on each birthday up to the adult rate. We exploit these age discontinuities and a 2017 reform that raised youth minimum wages to study employment and earnings of affected workers, using administrative data on the full population of young workers. We find clear bunching of wages at the age-specific minima and positive effects on earnings, with no evidence of offsetting employment losses for the affected age groups.
Research question
Do age-graded youth minimum wages raise young workers' earnings without reducing their employment?
Why it matters
Youth minimum wages are a recurring policy lever: many countries set lower floors for young workers on the assumption that a full adult minimum would price them out of work. The Dutch age schedule, with sharp jumps on each birthday, is an unusually clean setting to test whether that trade-off actually binds.
Main findings
- Wages bunch sharply at the age-specific minimum, confirming the floor binds for a large share of young workers.
- Raising the youth minimum wage increased affected workers' earnings.
- We find no offsetting fall in employment for the affected age groups over the period studied.