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Youth Minimum Wage Reform and the Labour Market - WP 04/03

Tables and Figures

Table 1 – Summary of Minimum Wage Changes
Effective Date Nominal Minimum Wage Affecting
  Adults 18-19 Year-olds 16-17 Year-olds
17 September 1990 6.13 --- ---
31 March 1994(a) --- 3.68 3.68
22 March 1995 6.25 (2.0) 3.75 (1.9) 3.75 (1.9)
18 March 1996 6.38 (2.0) 3.83 (1.9) 3.83 (1.9)
1 March 1997 7.00 (9.8) 4.20 (9.7) 4.20 (9.7)
6 March 2000 7.55 (7.9) 4.55 (8.3) 4.55 (8.3)
5 March 2001(b) 7.70 (2.0) 7.70 (69.2) 5.40 (18.7)
18 March 2002(c) 8.00 (3.9) 8.00 (3.9) 6.40 (18.5)
24 March 2003 8.50 (6.3) 8.50 (6.3) 6.80 (6.3)
1 April 2004 9.00 (5.9) 9.00 (5.9) 7.20 (5.9)
Increase (2000 — 2003) 12.6% 86.8% 49.5%

Notes: Percentage increase reported in parentheses.

(a) Youth minimum wage introduced for 16-19 year-olds at 60 percent of the adult rate.

(b) Adult minimum wage applied to 18-19 year-olds; minimum wage for 16-17 year-olds raised to 70 percent of the adult minimum wage. Announced 14 December 2000.

(c) Minimum wage for 16-17 year-olds raised to 80 percent of the adult minimum wage.

Table 2 – HLFS Sample Characteristics
  Quarterly Samples Annual Samples
  Full Sample(1) Workers(2) Full Sample(3) Workers(4)
Age 20.38 (0.03) 20.83 (0.03) 20.39 (0.02) 20.86 (0.03)
Female 0.49 (0.003) 0.47 (0.004) 0.49 (0.003) 0.48 (0.004)
Married 0.18 (0.004) 0.20 (0.005) 0.18 (0.004) 0.20 (0.005)
New Zealand Born 0.84 (0.005) 0.88 (0.004) 0.83 (0.006) 0.88 (0.005)
Pakeha 0.67 (0.007) 0.76 (0.006) 0.68 (0.008) 0.76 (0.007)
Maori 0.15 (0.004) 0.12 (0.003) 0.15 (0.005) 0.12 (0.004)
Pacific Islander 0.07 (0.004) 0.06 (0.004) 0.07 (0.005) 0.06 (0.004)
Asian 0.06 (0.003) 0.03 (0.002) 0.06 (0.004) 0.03 (0.003)
Wage or Salary Worker 0.58 (0.004) 1.00 0.58 (0.005) 1.00
Hours worked ­(a) Last week 30.5 (0.2) 30.5 (0.2) 31.7 (0.3) 31.7 (0.3)
Studying 0.30 (0.004) 0.12 (0.003) 0.34 (0.006) 0.15 (0.004)
Unemployed 0.08 (0.002) 0.00 0.08 (0.002) 0.00
Inactive 0.17 (0.003) 0.00 0.16 (0.004) 0.00
Received Non-student benefits     0.15 (0.004) 0.006 (0.002)
Hourly Wage     11.07 (0.06) 11.07 (0.06)
Labour earnings ­(a) Last week     361.6 (3.0) 361.6 (3.0)
Total income Last week     260.0 (2.7) 378.9 (2.9)
Total Observations 125,486 70,993 31,371 17,450
No. Proxies 43,485 25,151 694 236
No. Imputes     3,969 2,463

Notes: Estimated standard errors that control for Primary Sampling Unit (PSU) cluster in parentheses. All summary statistics are weighted by the HLFS sampling weights. Wages, earnings and incomes are in constant (June 1999) dollar values, adjusted using the CPI.

(a) Hours worked and labour earnings are conditional on working in wage or salary employment.

Table 3 – Difference-in-Differences’ Estimates of Changes in Employment and Hours Worked
  Age group Difference (from 20-25)
  16-17 18-19 20-25 16-17 18-19
(A) Wage or Salary Employment
1. Before(1997q1-2001q1) 0.426(0.007)[18,049) 0.552(0.008)[15,402] 0.650(0.006)[44,702] -0.223(0.009) -0.098(0.008)
2. After(2001q2-2003q3) 0.439(0.009)[11,116] 0.559(0.011)[9,450] 0.655(0.008)[26,767] -0.216(0.011) -0.096(0.010)
3. Difference(After – Before) 0.012(0.011) 0.006(0.012) 0.005(0.008) 0.007 (0.012) 0.001 (0.012)
(B) Actual Main Hours Worked Last Week (Conditional on Employment)
1. Before(1997q1-2001q1) 17.375(0.334)[7,417] 28.394(0.343)[8,160] 34.364(0.207)[28,200] -16.989(0.383) -5.969(0.339)
2. After(2001q2-2003q3) 18.687(0.380)[4,838] 28.368(0.388)[5,139] 34.006(0.268)[16,984] -15.318(0.406) -5.637(0.396)
3. Difference(After – Before) 1.313(0.482) -0.026(0.481) -0.358(0.288) 1.671 (0.510) 0.332 (0.505)

Notes: Estimated standard errors in parentheses: number of observations in square brackets.

Table 4 – Regression Estimates of Changes in Employment
  Age & Quarter(1) Covariates (2) 20-21 Spillover(3) Proxy Controls(4) Separate Year Effects(5) Age-specific Seasonals(6) Time Trends(7)
Age 16-17*Post-2001 0.005(0.008) -0.006(0.008) -0.000(0.009) 0.002(0.009)      
2001         0.022*(0.011) 0.023*(0.012) 0.016(0.016)
2002         0.001(0.011) 0.001(0.010) -0.002(0.018)
2003         -0.025(0.015) -0.021(0.015) -0.021(0.022)
Age 18-19*Post-2001 -0.000(0.008) -0.010(0.008) -0.006(0.008) -0.002(0.008)      
2001         0.007(0.012) 0.007(0.011) 0.030**(0.015)
2002         0.001(0.009) 0.002(0.008) 0.036**(0.015)
2003         -0.019(0.012) -0.012(0.013) 0.029(0.020)
Age 20-21*Post-2001     0.011(0.010) 0.013(0.010)      
2001         0.042***(0.012) 0.044***(0.011) 0.050***(0.013)
2002         0.008(0.013) 0.009(0.011) 0.023(0.015)
2003         -0.019(0.015) -0.004(0.014) 0.012(0.023)
F-statistic (Proxies)       16.05(0.00) 15.89(0.00) 15.10(0.00) 16.67(0.00)
F-statistic (Seasonals)           3.41(0.00) 3.32(0.00)
F-statistic (Time trends)             2.41(0.01)
Observations 125,486 125,422 125,422 125,422 125,422 125,422 125,422
R-squared 0.04 0.10 0.10 0.11 0.11 0.11 0.11

Notes: Coefficients followed by one, two, and three stars are significantly different from zero at the 10, 5, and 1 percent level, respectively. All specifications are estimated using OLS and include single age-specific and quarter-specific effects. Huber-White robust standard errors, which allow for arbitrary correlation in individual error terms within age-quarter cells, are in parentheses, except probability values for the F-statistics. The covariates included are dummy variables for gender, marital status, ethnicity, New Zealand born, urbanicity, and region of residence, and the relative size of the population of each age group (16-17, 18-19, 20-21, 22-25) in a particular year. The F-statistics test the joint significance of the proxies, age-specific seasonal effects, and age-specific linear time trends.

Table 5 – Regression Estimates of Changes in Hours Worked and Other Outcomes
  Employment(1) Hours Worked(2) Studying(3) Unemployed(4) Inactive(5) Received Benefits(6) Log Labour Earnings(7) Log Total Income(8)
Age 16-71*
2001 0.023*(0.012) 0.346(0.574 -0.035***(0.009) 0.020***(0..006) 0.020***(0.007) 0.020(0.013) 0.159***(0.038) 0.077**(0.034)
2002 0.001(0.010) 2.246***(0.452) -0.044***(0.009) 0.011(0.007) 0.019***(0.006) 0.030**(0.013) 0.217***(0.050) 0.161***(0.045)
2003 -0.021(0.015) 2.186***(0.462) -0.039***(0.012) 0.006(0.008) 0.023***(0.008) 0.030**(0.013) 0.287***(0.025) 0.069**(0.034)
Age 18-19*
2001 0.007(0.011) -0.307(0.559) -0.019**(0.009) 0.007(0.006) 0.012(0.008) 0.001(0.017) 0.111**(0.055) 0.046(0.053)
2002 0.002(0.008) 0.109(0.610) -0.015**(0.007) -0.000(0.006) 0.010(0.007) 0.012(0.013) 0.085(0.053) 0.084**(0.037)
2003 -0.012(0.013) 1.237(0.817) -0.005(0.013) -0.002(0.006) -0.002(0.007) -0.011(0.017) 0.143***(0.049) -0.004(0.055)
Age 20-21*
2001 0.044***(0.011) -0.465(0.486) -0.030***(0.008) -0.003(0.006) -0.007(0.008) 0.011(0.017) -0.040(0.072) 0.094**(0.037)
2002 0.009(0.011) 0.181(0.390) 0.004(0.009) -0.010*(0.006) -0.010(0.008) -0.001(0.016) 0.045(0.046) 0.032(0.046)
2003 -0.004(0.014) 0.404(0.570) -0.021**(0.010) -0.007(0.005) 0.014(0.011) 0.006(0.020) 0.016(0.024) 0.038(0.033)
Observations 125,422 70,707 125,422 125,422 125,422 31,354 17,301 31,354
R-squared 0.11 0.20 0.37 0.02 0.09 0.11 0.38 0.35

Notes: Coefficients followed by one, two, and three stars are significantly different from zero at the 10, 5, and 1 percent level, respectively. Huber-White robust standard errors, which allow for arbitrary correlation in individual error terms within age-quarter cells, are in parentheses. Regressions in columns (1)-(5) include single age-specific, quarter-specific effects, other covariates and age-specific seasonal effects (as specified in table 4, column (6)); those in columns (6)-(8) are estimated using annual data and thus include single age-specific and year-specific effects and other covariates.

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