Happy Birthday, You’re Fired! The Effects of Age-Dependent Minimum Wages on Youth Employment Flows in the Netherlands

Happy Birthday, You’re Fired! The Effects of Age-Dependent Minimum Wages on Youth Employment Flows in the Netherlands. Cato Institute. Jan Kabatek. March 30, 2016.

Many countries use age-dependent minimum wage systems to facilitate the entry of young workers into the labor force. The age dependency turns the minimum wage rate into a stepwise increasing function of workers’ calendar age, rendering young workers comparatively cheaper than older workers. Being subject to the reduced minimum wage, younger job seekers become more desirable for firms and therefore are more likely to find a job that fits their skills and experience. Indeed, several studies find positive effects of an age-dependent minimum wage on youth employment. However, what they fail to address is that, apart from its effects on employment stocks, this policy design changes the youth labor market flows, introducing new dynamics into the decisions of both employers and employees. [Note: contains copyrighted material].

[PDF format, 2 pages, 69.63 KB].

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