Friday, June 17, 2011

Employment and the Minimum Wage

Two Australian academics have recently published an article on the minimum wage and its employment effects in the British Journal of Industrial Relations [Wang-Sheng Lee and Sandy Suardi Minimum Wages and Employment: Reconsidering the Use of a Time Series Approach as an Evaluation Tool (2011) 49 BJIR 376-401]

The article analyses teenage employment in Australia for the period 1992 to 2008 which covers the period before and after the introduction of a federal minimum wage in 1997. The authors tentative conclusion is "that the seven minimum wage increases in Australia from 1997 to 2003 appear to not have had any significant negative employment effects for teenagers.” The authors suggest that one explanation for this is that “the increases have generally been moderate and predictable, closely tracking the general rise in price levels. Furthermore, they also add that for three states their analysis is “suggestive of a possible adaptation to the new regime.”

Others with more statistical and economic expertise may have views on the authors’ methodology and findings but for the more general reader it is worth noting one point made in the article. The authors refer to a meta-analysis of the minimum wage literature, [Doucouliagos, H. and Stanley, T. (2009). ‘Publication selection bias in minimum wage research? A meta-regression analysis’. 47 BJIR 406-428] and notes that” this analysis finds that research on minimum-wage effects contains the clear trace of selection for adverse employment effects. Once publication selection bias in the minimum wage literature is corrected, they find that little or no evidence of a negative association between minimum wages and employment remains.” (emphasis added).

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