Effects of Increases in the New Zealand Minimum Wage on Teenage Employment: An Empirical Examination using Survey and Administrative Data
Van Der Westhuizen, De Wet
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This thesis presents empirical evidence of the effects of the 2001 minimum wage policy reform on teenage employment. This reform resulted in the largest increase in real minimum wages, which totalled 68% in March 2001 for 18-19-year-olds and 35% over the period March 2001/02. Although New Zealand empirical evidence exists on the effects of this policy reform on teenage employment, there have been no attempts to re-examine its impacts since administrative data have become available through Stats NZ’s Integrated Data Infrastructure. Consequently, this thesis aims to fill this gap in the current New Zealand empirical evidence of the effects of minimum wage increases on teenage employment. Existing New Zealand empirical evidence has relied on survey data to examine the effects of minimum wage increases on teenage employment. This thesis extends the current body of knowledge by utilising individual-level administrative data. This thesis also draws on survey data to compare the benefits and limitations of the administrative data available over the selected sample periods of the empirical analyses. Formal estimation of the effects of the 2001 minimum wage policy reform on teenage employment adopts several identification strategies, including difference-in-differences and regression discontinuity, common in the international empirical minimum wage literature but not in New Zealand. The key value of the administrative data was revealed when measuring employment using administrative and survey data. When measured using administrative data, monthly variations in employment showed substantial seasonal fluctuation, which were not as observable when measuring employment at a quarterly-level using survey data. These monthly variations in employment were beneficial when formally estimating the effects of the 2001 minimum wage policy reform on teenage employment as they provided more variation in a key outcome variable. They also enabled formal validation of key assumptions to be undertaken, which would have been more challenging if relying on survey data. Although unique in the population examined, the final empirical analysis revealed effects on teenage employment from minimum wage increases which complemented some of the existing New Zealand empirical evidence. There are several relevant research and policy implications drawn from the descriptive and formal empirical results presented in this thesis. For research, the key limitation of the administrative data was identified as the absence of information on of hours of work over the selected sample periods. This restrained the empirical examinations undertaken in this thesis from fully exploring the effects of minimum wage increases on a range of relevant outcomes, such as hourly wage or hours of work. For policy, the formal empirical results suggest that large minimum wage increases may not immediately impact teenage employment; however, employers respond through alternative channels of adjustment. By considering a wider range of potential responses by employers, more refined minimum wage policy could be formulated.