the national minimum wage in recession evidence from uk/file/a2_1_xu.pdf · the national minimum...

Thenationalminimumwageinrecession:evidence

fromUK

LeiXU

June2016

Abstract

Thetopicofmysecondchapteristostudyage-dependentminimumwage.The

NationalMinimumWage(NMW)wasfirstintroducedin1999fortwogroups,

thoseagedabove22and18-21yearsold.Theage-dependentminimumwageis

usedtoregulatetheflowofyoungworkersintothelabormarket.InthispaperI

examinetheeffectofincreaseinminimumwageonemploymentopportunities

byapplyingSharpRegressionDiscontinuity(SRD).Iarguethattheeffectof

minimumwageincreaseonlaborsupplymaybeaffectedbylocalunemployment

rate,leadingtoacrowdingouteffectcomingfrompeoplewithhigherlevelof

education.Myinitialresultsshowthatanincreaseinminimumwageresultsin

higheremploymentopportunityforhigherskilledworkersandexaminesthe

existenceofcrowdingouteffect.Moreover,individualswithhigherlevelof

educationtendtotransferfromatemporaryjobintoamoreformaljobeasily

afterturningintohigherminimumwagelevel.Theevidencesuggeststhatthe

labormarketinwhichtheminimumwageprevailsisverycompetitiveina

recessionaryeconomy.

JELClassification:J22

Keywords:minimumwage,laborsupply,regressiondiscontinuity

LeiXu

EconomicStudies,UniversityofDundee

E-mail:[email protected]

1Background

Theintroductionofminimumwagehasbeenextensivelyexaminedbothby

policy-makersandeconomists.Inthestandardeconomicstextbook,ahigher

minimumwageresultsinreducedemploymentinaperfectlycompetitivelabor

market.Mostexistingpapersexaminetheeffectofintroductionofminimum

wageonemploymentopportunitiesacrossgroups(CardandKrueger1994,

Guiliano2013,Machinetal2003).Aconsensusaboutminimumwageisthata

modestincreaseinminimumwagewillnotleadtolargereductionof

employmentempirically.Buttheeffectofminimumwageonthesestillremains

manyunaddressedquestionsfromdifferentdimensions(Metcalf2008).

TheNationalMinimumWage(NMW)inUKwasfirstintroducedin1999for

people,above22yearsoldorbelow21yearsoldandabove18yearsold

respectively,whereasindividualsunder18yearsoldwerenotaffectedbythe

minimumwage.In2004,aminimumwagefor16and17yearoldwas

introducedatalowerratethantheonefor18-21yearsold,whichcomposed

age-dependentminimumwage,buttheNMWin1999wasalsoagedependent.

Theage-dependentminimumwageisusedtoregulatetheflowofyoungworkers

intothelabormarket.TheminimumwageinUKisincreasingonthebasisof

worker’sageanditbeginsfrom16yearsold.Bydifferentiatingtheminimum

wageitgivesemployersmotivationtorecruityoungerworkerstominimizethe

cost.However,thisage-dependentsystemwillleaveemployersspaceto

discriminateemployeesontheirageandqualifications(suchasapprenticeships).

Ithelpsyoungworkerswhoaremostvulnerableinthelabormarketinto

employment.Thediscriminationmayalsoexhibitsubstantialheterogeneitywith

regardstoworker’sage,qualificationsandsectorofemployment.Aftercoming

theagethresholdalreadymentionedabove,individualshavehigherexpected

wages,leadingtohighersearchintensityandmotivationforthejob.Potentially

itresultsinhighermatchingrateandproductivity.Ontheotherhand,italso

inducesmorecompetitiontolabormarketinwhichthetightnessisalreadyhigh.

Inthispaper,Ihighlightthepossibilityofacrowdingouteffecthappeningina

recessionaryeconomybroughtbyhighercompetitionafterincreaseinminimum

wage.Thestartingpointiscorrect,butthepolicycouldputmacro-economyinto

considerationtobalancethepositiveandnegativeeffects.

Atthetimeofintroductionofminimumwagebetween16-17,Education

MaintenanceAllowance(EMA)wasintroducedtofacilitateindividualstoobtain

moreeducationbetween16to18yearsold.Bothpoliciesaimtoreduceyoung

outofunemploymentbyeithergoingtofurthereducationorworkplace.After

introductionofthepolicy,theenrollmentratefor16-17yearsoldincreasedby

almost5%(NEET2005-2006).AlthoughEMAisdesignedforencouragingmore

peopleintoeducation,itmayinduceindividualsfromemploymentinto

educationeither.Theintroductionofminimumwageworksinasimilarwaytoo.

Soempiricallytheincreaseinenrollmentandemploymentratecouldbea

compositioneffectbybothpolicies.

Thepaperisorganizedasfollows.Insection2Iamgoingtointroducethe

literaturereviewanddiscussmycontributionandproblems.Themethodologyis

discussedinsection3.Insection4,itistheintroductionofdataset.Theresults

andgraphsaregiveninsection5.

2.Literaturereview

Asabroadtopicminimumwageisrelatedwithanumberofdimensions.The

mostattractivedimensionistheunemploymenteffectandwagedistribution.As

ananti-povertytool,ithasbeenintensivelyandextensivelydiscussedintermsof

thebalancebetweenincomeinequalityanddis-employment.Moreover,some

studieshaveshownthatminimumwageislinkedtothedecisionbetween

education,temporaryandpermanentjob(Croftenetal2009,NunezandLivanos

2015).Ithasbeenwelldeveloped,butstillmanyproblemsareunaddressed.

2.1Employmentprobability,crowdingout,spillovereffectandwage

distribution

Largeamountofstudyinvestigatetheeffectofminimumwageonemployment

orwagedistribution,sinceaspolicyinstrumentofminimumwageisregardedas

atooltoregulatewagedistribution.Standardeconomicmodelsuggeststhat

increaseinminimumwagewillleadtodecreaseinemploymentespecially

youngerworkersandaspillovereffect.Afterthegeneralizationofstandard

model,theconcept‘monopsony’providesanotherexplanationfortheeffectof

introductionofminimumwage.Amodestincreaseinminimumwagemayleadto

positiveemploymenteffect(CardandKrueger1995).Fromempirical

perspective,increaseinminimumwagedoesn’thavesignificantnegativeeffect

onemployment(CardandKrueger1994,Guiliano2013).InUK,Machin,Rahman

andManning(2003)examinetheeffectofintroductionofminimumwageon

wages,basedontheirowncollecteddata.Theirresultssuggestthatthe

minimumwagewillgreatlydecreaseincomeinequalityandonlyreduce

employmenttosomeextent.Increaseinminimumwagewillnotcausedamage

toyoungerworkersaslongastheminimumwageisnotsettoohigh.Thenby

risingupminimumwageitwillhelpyounggetintolabormarket.Stewart(2004)

examinestheeffectofNMWonemploymentprobabilitybyusing

Difference-in-DifferencebasedonBritishHouseholdPanelSurvey(BHPS),Labor

ForceSurvey(LFS)andNewEarningsSurveys(NES)andconcludesthatthereis

nosignificantnegativeeffectonemployment.However,theresultsmightbe

biasedduetospillovereffect.BrochuandGreen(2013)arguethathigher

minimumwageisassociatedwithlowerhiringrateandlowerjobseparation

rateusingCanadiandatafrom1979to2008.Unskilledworkersaremostlikely

affectedbytheincrease.Theyexaminethereasonbehindthetotaleffecton

employment.Dickens,RileyandWilkinson(2014)examinetheeffectofincrease

inminimumwageonemploymentpossibilitiesandreturnstoadultsbasedon

RDmethod.Theyarguethattheminimumwagewillincreasetheadult

employmentformale.However,theydon’ttaketheeffectoflocalunemployment

rateintoconsideration.Theliteraturesuggeststhatalimitednegativeeffecton

employmentfromintroducingorincreasingminimumwage.Andsincetheir

datasetisfrom1999to2009,EMAandintroductionofnewbandofminimum

wagemayalsoinducebiastotheresultseither.Dickens,RileyandWilkinson

(2015)examinetheemploymenteffectonthemostvulnerablegroupintheUK,

namelypart-timefemales,basedonLFSandNESbyusingDID.Theyconclude

thattheincreaseinminimumwagewilldecreasetheemploymentprobabilityfor

part-timefemaleanditwillgetworseintherecession.Intheirwork,they

examinetheheterogeneityoftheeffectofminimumwage.Theeffectcanbevery

diversedependingonthegroups.TheambiguouseffectofEMAandnew

minimumwagestillmaybiastheresults.

Besidestheeffectofminimumwageoncoveredgroup,theremightbespillover

effectaswell.Byincreasingminimumwageitwillincreaserelativepriceforlow

skilledworkers,leadingtohigheremploymentopportunityandwageforhigher

skilledworkers.Second,duetoincreaseinminimumwage,employersmay

reorganizetheirproductionprocess,increasingproductivity.Third,itwillalso

raisethereservationpriceforunemployedworkers.However,besidesthe

severalreasonssometheoreticalmodelalsoriseuptoexplainthespillovereffect,

buttheempiricalresultsarestillcontroversial.Dependingonthetreatedgroup

byincreasinginminimumwage,theemploymentopportunity(dis-employment

effect)canbebiasedduetoincludingspillovereffectcomingfromuntreated

group.DickensandManning(2004)arguethatthereislittleevidenceforthe

existenceoflargespillovereffectbasedonLee(1999)’sapproach.Stewart(2012)

alsosuggeststhatthereisaweakevidenceofspillovereffectinUK’slabor

market.HisresultsarebasedonDIDandcomparisonbetweenminimumwage

coveredgroupanduncoveredgroup.Thecounterfactualgroupinhisdatais

thoseindividualswhoarenotaffectedaboveminimumwagebecauseof

preexistingwage.

Atthemoment,mostexistingliteraturefocusedoneffectofminimumwage

withoutseriouslyconsideringtheeffectofmacro-side.Theminimumwagemay

haveadverseeffectindifferentperiod.Inarecessionaryeconomy,besidesthe

effectsImentionedbefore,theremayexistcrowdingouteffectinthegroup

coveredbyminimumwage.Theeffectmaydependonthetightnessoflabor,

especiallyforyoungerworkers.Addisonetal(2013)examinetheeffectof

increasinginminimumwageonemploymentandreturnintherecessionofU.S

basedonmoredescriptiveanalysis.TheyfocusontheFoodServicesand

DrinkingPlacessector.Inlinewithexistingliteraturetheydon’tfindsignificant

negativeeffectofminimumwageontotalemployment,buttheyfind

employmentofyoungerworkersissignificantlyaffectedbythetightnessof

youthlabormarketandalsoitmayvarybydifferentservices.Arulampalamand

Stewart(1995)examinetheeffectoflocalunemploymentrateonenteringand

exitingunemploymentindifferenttime.Intheirdatathesecondperiodof

unemploymentrateisdoubledcomparedtothefirstperiod.Intheirwork,local

unemploymentrateisusedasanindexofdemandconstraint.Theirresults

suggestthatlocalunemploymentratehavestrongernegativeeffectonthe

exitingofunemployment.HaurinandSridhar(2003)examinethereservation

wageandsearchdurationinarecessionaryeconomy,basedonPSID.Boththeir

OLSand2SLSresultssuggestthatthereservationwageandsearchdurationwill

notbeaffectedbylocalunemploymentrate.However,theresultsmightbebased

bytheweaknessofcorrelationbetweenlocalunemploymentrateand

employmentoutcome.Gautieretal(2002)explorethecrowdingeffectoflower

educatedworkersinrecessionbasedonafirmleveldataset.Theydon’tfind

significanteducationupgradingduringrecession,althoughaverageeducationof

outflowincreasedduringrecession.Howevertheirresultsmightbebiaseddue

tothedefinedjobcomplexitylevelandeducationlevel,sinceupgradingmay

happeninaverymarginaleducationlevel.

Onlyfewpapersdevelopedtheoreticalmodeltoexplaintheeffectofminimum

wage.Gorry(2013)developatheoreticalmodelbasedonsearchandmatching

model(Pissarides1994)toexploretheeffectofminimumwageonyouth

unemployment.Doladoetal(2000)extendthesearchmodel(VanOusand

Ridder1995)toexplainthecrowdingouteffectinSpain.Buttheirassumption

regardingleisureisperhapstoostrong.Assomeworkerswillwaitopportunity

forskilledjobinasubsequentperiod.Themodelcanbemoreendogeneous.

Thetypeofjobmayalsoimplythedifferenceofemploymentopportunity.

Comparedtotemporaryjobs,permanentjobwillmakefirmfacemoreriskwhen

theydecidetohireaworkerduetotheprotectionoflaborlaw.Althoughthe

costsoftemporaryjobislessthanpermanentjob,thereturnoftemporaryjobis

stilllowerthanpermanentjobduetolowerhumancapitalinvestmentand

personalabilityinpractice(Boothetal2002).Thechoicesarediversewhen

youngpeoplestarttheircareeraftercompletingeducation.Ontheonehand,

individualmayfacedifferentchoicesoutofdifferentmotivations.Ontheother

hand,employerswillalsobalancebenefitandcost.Employersfacemore

uncertaintycomingfrommarketandmayneedabufferoftemporaryworkersto

adjustproductionwithminimumcost.Sometimestheyarereluctanttoprovide

morepermanentjobforuntrainedyoungworkers.NunezandLivanos(2015)

discussseveralreasonsofindividualtostartfromtemporaryjobratherthan

findingapermanentjob.Firstly,doingatemporaryjobmayshowtheirtalentor

knowledgeinsomefieldtominimizetheasymmetricinformationbetween

workersandemployers.Thetemporaryjobcanbeseenasa“stepping-stone”for

theirlaterjob.Secondly,employersmayalsofacemorerisktorecruitayoung

workerduetothehighertrainingcost.Thentheyprefertogiveatemporary

contractfirst.Faccini(2013)arguesthattemporarycontractasascreening

devicehassignificanteffectonreducingunemploymentrateinEuropean

countries.Thirdly,bothsideswillconfrontopportunitycost.Italsovariesgiven

thestrengthofemployersandworkers.Lastly,duetotheinefficiencyoflabor

bargainingpowermarket,itishardtomatchperfectlybetweentwosides.Booth

etal(2002)examinethedifferencebetweentemporaryandpermanentjobinUK.

Theirresultssuggestthattemporaryjobhavelowerjobsatisfactionand

well-being,butthereisalsoevidenceofsteppingstoneeffectamongtemporary

job.However,Isuspecttheremayexistendogeneityoftheirtransitionresults.

EngellandtandRiphahn(2005)arguethatworkerswithtemporarycontract

mayexpresshighereffortinordertotransferintopermanentcontractunderthe

hypothesisthatemployerswillscreenworkersthroughtemporarycontract.That

impliestheevidencethattemporaryhassteppingstoneeffect.Intheirpaper,

theyselectwhetherworkerwillprovideunpaidworkhoursandabsentreasons

asmeasureofemploymenteffect.Duetoalackofidentificationstrategyfor

individualstakingpermanentortemporaryjob,theresultsstillcouldbebiased,

leadingtoambiguousconclusions.

Amountofliteraturehascommentedontransitionbetweenpermanentand

temporaryjob.Moreover,severalreasonshavebeenproposedtoexplainthe

behaviorofindividual’stransition,theoreticallyandempirically.But,tomy

knowledgefewliteratureshaveexaminethetransitioncausedbyincreasein

minimumwage.

2.2Mywork

Inthispaper,Iamgoingtofirstlyexaminetheeffectofminimumwageon

employmentopportunity.Secondly,Iamgoingtoexaminetheeffectonfinding

whichtypeofjobfordifferentgroups.

Aftertheintroductionoftheminimumwage,theemployersneedtimeandeffort

toreorganizeproductionprocessinordertominimizethecost.Thewagegap

betweenagegroupsmayencourageemployerstoreplaceolderworkerswith

youngerone.Unlikestudyofintroductionofminimumwage,thispaperfocuson

theeffectofincreasingminimumwageonlaborsupply,ratherthanthe

equilibriumoflabordemandandlaborsupply.Thispaperfocusesontheeffect

onlaborsupplywhenindividualsturninto21yearsoldandgethigherwages.

Afterturningintohigherminimumwageband,thereturnofindividualswhofind

ajobcoveredbyminimumwageareexpectedtobelargelyrisenup,leadingto

highersearchintensityforthoseunemployedindividualsandemployedworkers

whowanttofindamoreformaljob.Thatwillresultinhighermatching

probabilityandcompetitionamonglabormarket.Onthecontrary,firmswillface

moreproductioncost.Sincetheincreaseinminimumwageisananticipated

event,Idon’tseestrongreasonsemployerswillreorganizetheirproduction

processonceagain.Butstillemployersmaydecreaseemploymentorreplacing

youngerworkertosavethecost.MyworkissimilartoDickensetal(2014)in

whichtheyalsouseLFSandRD.TheRDisbasedonthedurationbetweenmonth

ofsurveyandmonthofbirth.Thiswillcomposeapairofcomparabletreatment

groupandcontrolgroupwhichcangiveusacausaleffectincurredbyminimum

wage.

Oneassumptionhereisthatthereisnoadministrativecosttoemployer,since

theemployermaypreferstableworkersiftheadministrativeisnon-negligible.

Thentheresultswillbebiasedupduetotheemployer’spreferencefrom

employeeside.Inthiscase,itisareliableassumptionsinceemployerpostsajob

giventheirlabordemandofproductionprocessandtheworkersacrosscut-off

pointwouldbeidenticaltoemployer.Anotherpotentialbiascomesfromthe

unemployedsiderelatingtoreplacementofyoungerworkers.Thisismore

ambiguous.Duetothenatureofagedependentminimumwage,employerhas

motivetoreplacetheworker,althoughworkersareidenticalaroundcut-off

point,thenumberofworkersonthelefthandsideofcutoffpointislessthanthe

righthandside.Butemployer’sfiringdecisionmaynotonlydependon

individual’sagebutalsotheirownproductionprocess.Thereisnoclear

conclusionthatwhetheremployerswillfireindividualsonlyonemonthbefore

theyturnintohigherwagelevelortheywillreplaceworkerswhentheyfindthe

substitute.However,fromthesimpleobservationofthedatathemotivationmay

beweakoritmayhappenindifferentperiod.Moreover,thereisnosignificant

changefromtheperspectiveofmacro-economygiventhecurrentdata

generatingprocess.Mywholesamplesareinarecessionaryperiod.AllofthoseI

describedabovemakesurethatthereisnochangeindemandsideacrossthe

cut-offpoint.

Increasingminimumwagewillleadtotwodiscontinuities.Firstly,higherreturns

leadtohighersearchintensity.Undersameconditions,thenumberofvacancyin

labormarketremainsconstant,leadingtohighermatchingrate.Secondly,across

thecut-offpointsearchintensityofeachskillgroupwillincrease,leadingto

crowdingouteffectfromhigherskilledworkerstolowerskilledworkers,

reducingtheopportunityforthatgroup.Thecrowdingouteffectwillmostly

happeninrecession,sincetheincreaseinlaborsupplycouldnottransforminto

employmentexpectedly.Higherskilledworkersmayhavehigheremployment

opportunitycomparedtolowerskilledworkers.Thefactthattheyarecompeting

forthesamejobonlymakesitharderforlowerskilledworkers.Therefore,the

overalleffectofincreasingminimumwageonindividualswithlowerlevelof

educationbasedonthisstrategymaycomefromthecombinedeffectsofincrease

insearchintensityandcrowdingouteffectcomingfromindividualswithhigher

levelofeducation.However,itisnoteasytoidentifyinpractice.Comparing

employmentopportunityoverqualificationsisambiguouswhenhigherskilled

workermayfindajobuncoveredbyminimumwage.Oneobviousargumentis

individualwithlesseducationwillbemoreaffectedbyminimumwage.Givenmy

results,minimumwagewillmostlyaffectindividualswithqualificationbelow

A-levels.AboveIdescribedpicturesthemovementofemploymentindifferent

qualifications.Besidesemploymentopportunity,individualsmaychangetheir

choiceaboutworkafterthechangeofreturniftheyhavechoicetochange.

Individualswithhigherlevelofeducationarestilllookingforminimumwage

leveljobnormallytendtofacethischoice.JustlikeIdemonstratedabovein

literaturereview,individualsmaypreferamorepermanentjobdueto

opportunitycostwhentheirreturnisincreased.Crowdingouteffectmaybe

moresignificantintheseresults.

Asforthefirstquestion,mycurrentresultssuggestthatthereisasignificant

positiveeffectofincreaseinminimumwageonindividualswithqualificationof

morethanfiveGCSEsorhighergradesofGCSE,butnotsostrongnegativeeffect

onindividualswithqualificationoflowergradesofGCSE.Moreover,bothyears

ofeducationandnumberofGCSEhasbeenincreasedaftercrossingthecut-off

point,showingthatthereexistcrowdingouteffectonindividualswith

qualificationlowerthanfiveGCSEs.ComparedtoDickensetal(2014),apossible

explanationisduetohigherlocalunemploymentrate,theincreaseinsearch

intensitytransfernegativeeffectonindividualswithlowerlevelofeducation.In

thispartmycontributionistoexaminetheheterogeneouseffectsandexplainthe

laborflowacrossthecut-offpoint.Althoughtheemploymentopportunityis

clearforobservationswithlessthanfiveGCSE,Istilldon’tknowthemagnitude

ofnegativecrowdingouteffectcomingfromhigherlevelofeducation.Crowding

outeffectisexpectedtobeheterogeneousgivendifferentlevelofeducation.

SecondlyIamgoingtoexaminethetypeofjobforemployeesaffectedby

increaseinminimumwage.Notonlyemploymentopportunitiesbutalsothe

typesofjobwillbeaffectedbythechangingofrelativeprice.Putitdifferently,

thechangeoftypeofjobforindividualsacrossthresholdmayhaveclearerimage

forusintermsofhowtheemploymentopportunityisaffected.Iassumethe

motivationofindividualstowardtoajobissimilar.Workersaremorewillingto

findamoreformaljobwhenreturnishigher.Giventhisdatageneratingprocess,

thetotalnumberofmatchedandvacantjobremainsunchanged.Weexpectthe

decreaseinvacancyorthechangeoftypesofjobbetweengroupswithdifferent

qualification.Giventhegloomyeconomyandthepreviousresults,theresults

maypresentcrowdingouteffecttosomeextent.Iftheincreaseinemployment

opportunityofaformaljobforindividualswithhigherlevelofeducationisatthe

expenseofcorrespondingdecreaseinemploymentopportunityforindividuals

withlowerlevelofeducation,thenonehastosuspecttheoverallbenefitsof

increasinginminimumwage.

Boththeemploymentopportunityandtypeofjobwillhelpexplainthe

accumulationofhumancapitaloflowpaidworker.Thatwillhelpexplainthe

statedependenceinthefutureoftheircareer.Differenttypesofjobmayprefer

differentworkers.Boththeeducationandtrainingcanhelpaccumulatethe

humancapital.Forsomestudentsarenotwillingtoobtainmoreeducation,

vocationaltraining,work-relatedtrainingorapprenticeshipmayhelpthemmore

inpractice.Butalowqualifiedtrainingorlowprobabilityofreceivingthose

trainingcanleadtolowerprobabilityofemploymentinthefuture.Thatmaygive

animplicationtostatedependence.Asforthewageandprobabilityofreceiving

jobortrainingatthebeginningofthecareermaydependontheelasticityof

differenttypesofworker.Thatbelongstoclassiceconomicmodel.

ThirdlyIhopetodescribethebehavioroflaborflow.Thestrategyisstillbased

onRD,butthedifferencehereisIusedurationbetweenmonthofjobstartedor

jobendedtomonthofbirthcomparedtothefirstone.Thiswilldescribethe

effectofincreaseinminimumwageonworkerandfirm’sbehavior.Thejob

accessionrateandjobseparationratewouldchangeonthebasisofdistance

betweenworker’sbirthmonthtothemonthofjobstartorjobend.Thefirstdata

generatingprocessdoesn’tincludetheinformationofthebehaviorofbothsides.

Thestockofjobsinlabormarketlargelydeterminedbyproductionprocessof

firms,determinedbyoutputprice,inputpriceandproductiontechnologygiven

theclassicaleconomicmodel.Atcertainpoint,ifweassumebothtechnologyand

outputpriceareholdconstant,thequestionhereiswhetherincreaseininput

pricewillchangethestockoflabororthecharacteristicsoflabor.Toanswerthat

questionweneedtolookatamoredynamicpictureratherthanstaticinwhich

justpicturesthefeaturesoflaborstock,suchasthechangesinjobcharacteristics,

workerscharacteristicsandthepatternoflaborflow.

3.Regressiondiscontinuityregression

3.1FoundationofRD

RDdesignisaquasi-experimentaldesigninwhichtheprobabilityofreceiving

treatmentwillbechangeddiscontinuouslyacrossthethresholdasafunctionof

controlvariables(Hahnetal2001).Itisaincreasinglypopularmethodin

appliedeconometrics(ImbensandLemieux2008).Inthispaper,Iamgoingto

examinetheagediscriminationbasedonsharpdiscontinuitywhichthe

treatmentvariabledependsonasetofobservablevariables.Thereisanother

discontinuitycalledfuzzydiscontinuitywhichthetreatmentvariabledependson

asetofrandomvariablesbuttheprobabilityisknownaroundthethreshold

(Hahnetal2001).Thiseconometricframeworkexploitsthediscriminationfrom

employersbasedonfuzzyregressiondiscontinuitymodel:

𝑌!" = 𝛼 + 𝛽𝑇𝑅𝐸𝐴𝑇!" + 𝛿(𝑎)+ 𝛾𝑋!+𝜀!" (1)

where 𝑌!" isinterestedoutcomevariableforindividualiofagea. 𝑋! arethe

controlvariables.HereTREATisourinterestvariablewhichcapturesthe

employmentprobabilityinducedbydurationtobirthmonth.Itequalstooneif

individualis21yearsold. 𝛿(𝑎) iscalledagefunctionwhichcapturestheeffect

ofage.AkeyassumptioninRDstrategyisthat 𝛿 (𝑎) iscontinuousfunction.

Anotherassumptionisthatthesamplebeforeandafterbirthdayshouldbe

randomlyassigned.Thatmeansthetreatmentvariableistheonlysourceof

discontinuity.

𝛿(𝑎) = 𝑑𝑢𝑟𝑎𝑡𝑖𝑜𝑛 + 𝑑𝑢𝑟𝑎𝑡𝑖𝑜𝑛! + 𝑑𝑢𝑟𝑎𝑡𝑖𝑜𝑛 ∗ 𝑇𝑅𝐸𝐴𝑇 + (𝑑𝑢𝑟𝑎𝑡𝑖𝑜𝑛 ∗ 𝑇𝑅𝐸𝐴𝑇)! (2)

And 𝛽! istheeffectofdiscontinuityinducedbyemployer’sdiscrimination.Itis

difficulttoselectagecontrolfunction.Herelargelyrobusttestinpracticeis

necessary.Byincludingcontrolvariablestominimizetheerrortermweneedto

mimictheparametricform.Undertheparametricframework,theestimates

mightbebiasedduetootherexogeneities.AfterthetestofvalidityofRDdesign,

thecontrolvariablesareusedtodecreasethevariability,wecaneliminatethe

externalitytosomeextents,butthenumberofobservationsisdecreasingaswell.

Thisisthetradeoffbetweenprecisionandbias.

TheessenceofRDistocomparethetreatmentgroupontherighthandsideof

thecut-offpointandcomparisongroupontheleftsideofthepointandthe

controlgroupfrommarginallybelowthresholdisvalidcounterfactualfor

treatmentgroupfrommarginallyabovethreshold(Hahnetal2001).Aroundthe

thresholdthetreatmentstatusisindependentofallvariablesnomatter

observableandunobservablejustlikerandomassignment(Lee2008).

Thevalueofinstrumentcan’taffecttheoutcomeindependently.Justlike

exclusionrestrictiontheinstrumentcanonlyaffectoutcomeinonechannel.

Heretheinstrumentsarethedistancefromthebirthmonth.Putitdifferently,

individualshaveimprecisecontrolofthetreatmentstatus.Inthiscase,the

randomnessofbirthmonthcanguaranteetherandomnessofthedistancefrom

threshold.Theminimumwageisintroducedin1999,thereforeincreaseinwage

isanticipatedbyyoungworkersandemployer.Apotentialbiasisthatthe

anticipationmaychangethebehaviorofbothsidestosomeextent.Sinceifthe

individualscanpartiallycontrolthevaluearoundthreshold,thenthiswillleadto

somebias(Lee2008).Underthenoadministrativecosttheremightnothave

significantbias.

3.2ValiditytestofRD

GraphsareextremelypopularinpracticalworkofRDduetoitstransparency.

However,visualpresentationwouldbeambiguousinsomecases.Various

validitytestsareneededinthiscase.

ManyideashavebeenproposedwhenitcomestoexaminethevalidityofRD.

Firstlyoneshouldexamineifthetwogroupsarerandomlyassignedby

examiningthecovariatesbalancebeforetheregressions.Thecovariatescan’tbe

influencedbytreatmentsincethosearedeterminedpriortotheassignment

variableandtreatmentvariable(LeeandLemieux2009).Putitdifferently,

variablesintwogroupsshouldbeirrelevanttothetreatmentstatusexceptfor

outcomevariables.Ifthecovariatesshowreasonablefeaturesaroundthecut-off

point,thenitimpliesthattreatmentgroupandcontrolgrouparesimilartosome

extents.

Secondly,onecantestthegoodnessoftheparametricmodeltocalculatethe

residualandexaminethefeaturesoftheresidual(LeeandLemieux2009).

Thirdly,onecanapplyacomparisontestinthecircumstancewithouttreatment

effect.

4Dataandstatistics

ThespeciallicenseofLaborForceSurveycontainsmonthofbirthwhichisused

tocalculatethedistancefrommonthofsurveytomonthofbirth.Itisfiveyears

from2008to2012andtheminimumwageofapprenticewasintroducedin2010.

Thesampleisrestrictedtoindividualsagedfrom16to30ofthosewhoare

employed.IntheUK,theminimumageforworkingis16yearsoldwith

completingcompulsoryschooling.Theminimumwageisdividedintothreeage

bands,16-17,18-21andabove21.Employersalwayswanttorecruitproductive

workerwithgoodexperiences.Thenitgiveslittlespaceforyoungworkerssince

theyareyoungandlackexperiences.Shannon(2011)arguesthatabolishmentof

minimumwagewillsignificantlydecreasetheemploymentfor15-16yearsold

workersinCanadabasedonDID.Bydifferentiatingtheminimumwage,itwill

giveemployersmotivetohireandtrainyoungworkers.

BeforeOct2010,theincreaseinminimumwageistargetedin22yearsold,but

theageischangedinto21after2010.Thesamplesinthispaperareindividuals

whoare20,21and22yearsold.A-levelgraduatesmayalsofindajobinthe

rangeofminimumwage.Thentheremightbenon-negligibleeffecton

employmentopportunityofindividualswithlowerlevelofeducation.Therefore,

insteadoffocusingon18yearsoldthreshold,Iamgoingtolookfortheeffectof

increaseinminimumwageonemploymentopportunityofindividualswhoare

turninginto21yearsold.Ialsodropindividualswhoarestillinschool.The

datasetincludemonthofbirthwhichcanbeusedtocalculatethedistance

betweenmonthofsurveyto21yearsold.Aftercleaningthedata,itincludes

individualswhoarejustpassing20yearsoldandverycloseto22yearsold.

Thereare22monthsaltogether.

5Results

5.1Employmentopportunities

Traditionallyindividualswithlowerlevelofeducationareexpectedtobemore

affectedbyincreaseinminimumwage.Althoughindividualswithmoreyearsof

educationmaystillfindajobwhichispaidinminimumwage,inmyresultsthe

employmentopportunityofindividualswithA-levelsarenotlargelyaffectedby

minimumwage.However,theytendtofindamorepermanentjobafterincrease

inreturns.Theresultsfocusonallsamplesregardlesstheirsex,mostlydueto

limitedsamplesize.Theinterestvariableisthedummyofcut-offpoint,which

willshowthecausaleffectofincreaseinminimumwageonemployment

opportunity.Eachregressionincludes11monthseithersideofthe21stbirthday.

Inordertobalancebetweenexogeneityandefficiency,Iexaminethe

discontinuityindifferentperiodforeachregressionandadddifferent

polynomialtermsasagefunction.

Graph1describestheemploymentrategivendifferentqualificationsbydifferent

distancefrommonthofsurveytomonthofbirth.Thegraphofupperleftisthe

employmentrateofindividualswithqualificationlowerthanGCSE.Upperright

andlowerleftistheemploymentrateofindividualswithlowerthanfiveGCSEs

andmorethanfiveGCSEs.Thelastisforindividualswhosehighestqualification

isA-level.Fromthesimplepatternofemploymentrateindifferentperiod,there

isnoclearevidenceintermsoftherelationbetweenminimumwageand

employmentopportunityforindividualswithanyqualificationsexceptfor

individualswithmorethanfiveGCSEs.Fromthelowerleftgraph,the

employmentrateofpositiveperiodisevidentlylargerthanthelefthandside.

Thatmayimplyincreaseinminimumwagemayhavelargereffectonthose

workers.However,thosegroupswhoarenotaffectedbyminimumwagemay

notcomefromthesamereasons.ObviouslyA-levelstudentstendtohavebetter

chancetogetajobcomparedwithindividualswithlesseducation.

<Graph1Here>

Table1showstheProbitregressionresultsofindividualswithqualification

lowerthanGCSEandGCSEgivendifferentperiodandpolynomialtermsfor

checkingtherobustness.Itsuggeststhatincreaseinminimumwagedoesn’t

incuranychangetoemploymentopportunitiesforthesetwogroupsofpeople.

IndividualsbelowGCSEareveryambiguoussincethequalificationsarevery

diverse.AsIdemonstratebefore,thediscontinuityaroundcut-offpointisa

compositioneffect,combiningtheeffectofincreaseinsearchintensityandlabor

demandduetohigherlocalunemploymentrateinarecessionaryperiod.

<Table1Here>

Table2focusesontheeffectamongindividualswithGCSEastheirhighest

qualification.IndividualswithmorethanfiveGCSEshavemoreemployment

opportunityontherighthandsideofthecut-offpoint,butthereisnosignificant

effectonindividualswithlessthanfiveGCSEs.Itsuggeststhatincreasein

minimumwagewillleadmoreindividualswithmoreGCSEsintoemployment.

Thereisasignificantdifferencebetweenindividualswithhighernumberof

GCSEsandlowernumberofGCSEs.Themotivationoftwogroupsofobservation

willingtofindajobisidentical.Onemaywonderifthereexistscrowdingout

effectcomingfromobservationswithhigherqualifications.

<Table2Here>

Thegraph2picturestheemploymentprobabilitygivendifferentperiodsfor

individualswithhighernumberandgradesofGCSEanditiscalculatedbythe

meanofindividual’semploymentprobabilityineachperiod.Thefirstgraphis

theemploymentopportunityofindividualswithfiveofmoreGCSEs.Thesecond

graphistheemploymentopportunityofindividualswithGCSEofA-Cgrades.

Acrossthethreshold,thereisaclearjumpabout5%causedbytheincreasein

minimumwage.

<Graph2Here>

Thegraph3showstheemploymentprobabilityofindividualswithlower

numberandgradesofGCSE.Theevidenceofindividualswithlowerlevelof

educationisnotasstrongashigherlevelofeducation.Theeffecttendstobe

negativeforthisgroupandthejumpisalsoclearforindividualswithlower

gradesofGCSE.AsIdemonstratedabove,theeffectisacompositioneffectof

increaseinminimumwageandcrowdingouteffect.

<Graph3Here>

Table3usesanothermethodtotestifytheresultsagain.LFSincludesthe

numberofGCSEsheldandgradesofGCSEsaswell.Individualswithhigher

gradesofGCSEmaystillgivethemmoreedgetogainmoreemployment

opportunities.TheresultsshowthatindividualswithlowergradesofGCSEhave

loweremploymentopportunityafterincreaseinminimumwage.Sincethe

increaseinminimumwagewillonlyincurpositiveeffectonlaborsupplyandI

assumethatthereisnosignificanteffectfromlabordemand,itisnaturaltothink

thereisacrowdingouteffectfromindividualswithhigherorbetter

qualifications.

<Table3Here>

Table4givesestimatesofthechangeintermsofyearsofeducationand

proportionofhighervolumeGCSEs.Itshowscrowdingouteffectdirectly.Inthe

firstpartofresults,itistheaverageeducationofworkerswhoareemployed

givendifferentperiods.Acrossthecut-offpoint,theaverageeducationrisesup

0.3year.Inthesecondpartofresults,itsuggeststhattherearemoreindividuals

withqualificationhigherthanfiveGCSEscomparedtothelefthandsideof

cut-offpoint.

<Table4Here>

5.2Whichjob?

TheemploymentopportunitiesIdiscussedaboveafterincreasingminimum

wagewillpossiblyreflecttheworker’sattitudeintermsoffindingajobandthe

competitionacrossqualifications.Butthetypeofjobortheattitudetowardto

thejobisambiguous.Thetypeofjobhassignificantinfluenceontheirreturnand

stability,aswellastheaccumulationofhumancapital.Investigatingthetypeof

jobwilldeepentheunderstandingtheemploymentopportunitiesacross

differentgroups.Individualswillfaceopportunitycostwhentheydecidetofind

amore“formal”job.Theedgemightbedifferentgivendifferentgroupsorthey

mightbesimilar.Sotheimportancehereistoinvestigateifindividualstendto

findapermanentjobwhenthereturnishigherandwhethertheyfinda

permanentjobiftheywantedto.Atthebeginning,Iexaminetheemploymentof

findingafull-timejob.Butafull-timejobcanbeatemporaryaswellanda

permanentpositioncouldbeapart-timejobeither.So,Icallajobthatisboth

full-timeandpermanentagood“Job”.The“Job”shouldbemoreformaland

advancedsometime.Thejobshouldownsomegoodcharacteristics,suchas

higherreturn,higherstability,moreon-the-jobtrainingandsoon.

Graph4istheproportionofindividualinafull-timejob.Thesub-panelsgraphs

identifydifferentgroupsofpeople,justlikeGraph1.AfteraglanceoftheGraph4,

individualshavingqualificationslessthanGCSEandA-leveldon’thave

significantdifferenceacrosscut-offpoint.Butfromindividualswithlowerand

highernumberofGCSE,thereisacleartrendforthosegroups.Individualswith

highernumberofGCSEtendtofindafull-timejobafterincreaseminimumwage.

Liketheresultsofemploymentopportunities,theproportionofindividualswith

lessnumberofGCSEsfindingafull-timejobdecreasesaftercut-offpoint.Graph

5istheproportionofindividualhavinga“job”.Thepatternisquitesimilarto

Graph4.

<Graph4Here>

<Graph5Here>

FromTable5to9Ipresenttheresultsofemploymentopportunitiesindifferent

typesofjobonthebasisoflevelofeducation.Thereismoreevidencefor

individualswithhigherlevelofeducationfindingamoreformaljobcompared

withindividualswithlowerlevelofeducation.TogetherwithGraph4and5,I

concludethatindividualswithhigherlevelofeducationtendtofindamore

formaljobafterincreaseinminimumwage.However,thereisnosignificant

increaseofproportionofformaljobforindividualswithlowerlevelofeducation.

GiventheassumptionIdescribedabove,differenttypesofworkerhavesimilar

motivationtowardtoamoreformaljob.Theresultsofindividualswithlower

levelofeducationcouldbeexplainedbyacompositioneffect,combingtheeffects

ofincreaseinsearchintensityandcrowdingouteffect.

6Conclusions

Inthefirstpartofthepaper,Iexaminetheemploymenteffectofincreasein

minimumwagefordifferentgroups.Literaturemainlyfocusesonthe

introductionofminimumwage.Intheirstudies,thechangeinemployment

probabilityisfoundtobemainlycausedbothbyemployersandemployees.

Commonlytheresultssuggestthatthereisnosignificantnegativeeffectonlabor

market.

Inthispaper,Iexaminetheeffectofage-dependentminimumwageonlabor

supply.Afterseveralyearsofintroductionofminimumwage,employershave

alreadyreorganizedtheproductionprocess.Acrossthethreshold,wecan

observetheeffectofincreasingminimumwageonthemotivationofindividuals

findingajob.

Theresultsfirstlysuggestthatthereisnosignificanteffectofanincreasein

minimumwageontheemploymentprobabilityofindividualscoveredby

minimumwage.Thismightbeduetoacompositioneffect,combiningthe

positiveeffectofincreaseinmotivationofworkingandthenegativecrowding

outeffectcomingfromhigherlevelofeducation.Individualswithhighernumber

orgradesofGCSEhavehigherprobabilityofbeinginemployment.Andthe

resultsofindividualswithlowernumberofgradesofGCSEsuggestthatthereis

amodestnegativeeffectandtherearenosignificantresultsforindividuals

belowGCSE.Inordertoexaminethecrowdingouteffect,Iexaminetheaverage

levelofeducationandtheproportionofhighernumberofGCSEsacrossthe

cut-offpoint.Theresultsshowthatbothnumbersincreaseacrossthethreshold.

Theimplicationofthispaperisthatweshouldnotneglectthepotentialnegative

effectofincreaseinminimumwage,especiallyinarecessionaryperiod.Duetoa

tightlabormarket,theincreasingminimumwagewillnotonlyincreasethe

averageemploymentbutalsomayberesultinmoreovereducatedworkersin

labormarket.Theminimumwagepolicyshouldbemoreflexibleonthebasisof

tightnessoflabormarket.

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Tablesandgraphs

Graph1.Employmentratefordifferentqualifications

Notes:Thevariable“lessthanGCSE”includesindividualswhosehighestqualificationislower

thanGCSEaccordingtovariable'HIQUAL'inLFS.LowernumberofGCSEincludesindividuals

whosehighestqualificationisGCSEandholdlessthan5GCSEs.HighernumberofGCSEincludes

individualswhosehighestqualificationisGCSEandhold5ormorethan5GCSEs.

Source,LFS

.6.6

5.7

.75

Per

cent

age

of e

mpl

oym

ent

-10 -5 0 5 10dur

Less than GCSE

.65

.7.7

5.8

.85

Per

cent

age

of e

mpl

oym

ent

-10 -5 0 5 10dur

Lower number of GCSE

.75

.8.8

5.9

.95

Per

cent

age

of e

mpl

oym

ent

-10 -5 0 5 10dur

Higher number of GCSE.7

.8.9

1

Per

cent

age

of e

mpl

oym

ent

-10 -5 0 5 10dur

A-level

Table1.EffectofincreasingminimumwageonindividualswithGCSEandbelow

GCSEqualification

Being

employed

Employ(lessthanGCSE) Employ(GCSE)

Polynomial

terms

Windowlength Windowlength

22months 12months 4months 22months 12months 4months

Constant 0.036

[0.044]

0.023

[0.060]

0.001

[0.107]

0.100

[0.047]

0.037

[0.064]

0.035

[0.113]

Linear 0.001

[0.095]

-0.092

[0.138]

0.046

[0.100]

0.057

[0.145]

Quadratic -0.077

[0.163]

0.180

[0.268]

-0.056

[0.172]

0.396

[0.286]

Cubic 0.068

[0.264]

0.195

[0.540]

0.464*

[0.277]

1.10*

[0.570]

Observation 3613 1960 638 3602 1950 669

Notes:Thedependentvariableiswhetherindividualisinemployment.Thecategoryoflessthan

GCSEincludesindividualswithqualificationlowerthanGCSEaccordingtovariableof“HIQUAL”in

LFSandGCSEincludesallindividualswhosehighestqualificationisGCSE.Theresultsarebasedon

differentpolynomialtermsandwindowlength.Controlvariablesarelocalunemployment,dummy

fordisable,andyears.(*)significantat10%;*significantat5%;**significantat1%;***significantat

0.1%respectively

Table2.Effectofincreasingminimumwageonindividualswith

lessormorethanfiveGCSEs

Being

employed

Employ(5-GCSEs) Employ(5+GCSEs)

Polynomial

terms



Constant 0.011

[0.058]

-0.068

[0.080]

-0.148

[0.152]

0.283***

[0.084]

0.252**

[0.115]

0.353*

[0.198]

Linear -0.084

[0.124]

-0.137

[0.184]

0.328*

[0.176]

0.448*

[0.256]

Quadratic -0.250

[0.218]

0.438

[0.370]

0.281

[0.292]

0.207

[0.471]

Cubic 0.345

[0.352]

1.02

[0.722]

0.594

[0.462]

1.15

[1.01]

Observation 2224 1192 388 1378 758 281

Notes:Thedependentvariableiswhetherindividualisinemployment.Thecategoryof5-GCSE

includesindividualswithlessthan5GCSEand5+GCSEincludesindividualswith5ormorethan

5GCSE.Theresultsarebasedondifferentpolynomialtermsandwindowlength.Control

variablesarelocalunemployment,dummyfordisable,andyears.(*)significantat10%;

*significantat5%;**significantat1%;***significantat0.1%respectively.

Table3..EffectofincreasingminimumwageonindividualswithGCSEofA-Cand

GCSEofD-G

Being

employed

Employ(D-GGCSE) Employ(A-CGCSE)

Polynomial

terms



Constant -0.054

[0.101]

-0.297**

[0.142]

-0.434*

[0.257]

0.151***

[0.054]

0.130*

[0.074]

0.140

[0.131]

Linear -0.344

[0.211]

-0.560*

[0.312]

0.192*

[0.116]

0.255

[0.168]

Quadratic -0.606*

[0.367]

1.16*

[0.615]

0.131

[0.199]

0.353

[0.332]

Cubic 0.384

[0.581]

0.156

[1.23]

0.521

[0.322]

1.34**

[0.666]

Observation 761 405 119 2841 1545 524

Notes:Thedependentvariableiswhetherindividualisinemployment.Theresultsarebasedon

differentpolynomialtermsandwindowlength.Controlvariablesarelocalunemployment,

dummyfordisable,andyears.(*)significantat10%;*significantat5%;**significantat1%;

***significantat0.1%respectively.

Table4.Crowdingouteffect

Dependent

variable

Yearofeducation ProportionofhigherthanfiveGCSEs

Polynomial

terms



Constant 0.468***

[0.025]

0.292***

[0.035]

0.129**

[0.062]

0.123***

[0.032]

0.10**

[0.044]

0.185**

[0.086]

Linear 0.031

[0.056]

0.026

[0.080]

0.390**

[0.196]

0.075

[0.070]

0.159

[0.102]

Quadratic 0.063

[0.095]

0.141

[0.154]

0.193

[0.114]

0.195

[0.160]

Cubic 0.063

[0.153]

0.621**

[0.312]

0.214

[0.151]

0.029

[0.194]

Observation 18129 9844 3305 6370 3485 1214

Notes:Thedependentvariablearethefulltimeofyearsofeducationandifindividualshold5or

morethan5GCSE.Theresultsarebasedondifferentpolynomialtermsandwindowlength.

Controlvariablesarelocalunemployment,dummyfordisable,andyears.(*)significantat10%;


Graph2.Estimatedprobabilityofemploymentforhighergradesornumbersof

GCSE

Notes:Thegraphplotstheestimatedaverageprobabilityofemploymentratewhichiscalculated

byaveragingindividual’sestimatedemploymentprobabilityindifferentperiod.

Source,LFS

.8.8

2.8

4.8

6.8

8

Pro

babi

lity

of b

eing

em

ploy

men

t

-10 -5 0 5 10dur

Higher number of GCSE

.76

.78

.8.8

2.8

4

Pro

babi

lity

of b

eing

em

ploy

men

t

-10 -5 0 5 10dur

Higher grades of GCSE

Graph3.Estimatedprobabilityofemploymentforlowergradesornumbersof

GCSE

Notes:Thegraphplotstheestimatedaverageprobabilityofemploymentratewhichiscalculated

byaveragingindividual’sestimatedemploymentprobabilityindifferentperiod.

Source,LFS

.7.7

1.7

2.7

3.7

4

Pro

babi

lity

of b

eing

em

ploy

men

t

-10 -5 0 5 10dur

Lower number of GCSE

.65

.7.7

5.8

Pro

babi

lity

of b

eing

em

ploy

men

t

-10 -5 0 5 10dur

Lower grades of GCSE

Graph4.Employmentrateforindividualswithafull-timejob

Notes:Thegraphplotstheemploymentrateoffull-timejob.Thevariable“lessthanGCSE”

includesindividualswhosehighestqualificationislowerthanGCSEaccordingtovariable

'HIQUAL'inLFS.LowernumberofGCSEincludesindividualswhosehighestqualificationisGCSE

andholdlessthan5GCSEs.HighernumberofGCSEincludesindividualswhosehighest

qualificationisGCSEandhold5ormorethan5GCSEs.

Source,LFS

.31

.32

.33

.34

.35

.36

Per

cent

age

of fu

ll-tim

e jo

b

-10 -5 0 5 10dur

Less than GCSE

.32

.34

.36

.38

.4

Per

cent

age

of fu

ll-tim

e jo

b

-10 -5 0 5 10dur

Lower number of GCSE.3

6.3

8.4

.42

.44

Per

cent

age

of fu

ll-tim

e jo

b

-10 -5 0 5 10dur


.35

.4.4

5

Per

cent

age

of fu

ll-tim

e jo

b

-10 -5 0 5 10dur

A-level

Graph5.Employmentrateforindividualswitha“formal”job

Notes:Thegraphplotstheemploymentrateofbothfull-timeandpermanentjob.Thevariable

“lessthanGCSE”includesindividualswhosehighestqualificationislowerthanGCSEaccordingto

variable'HIQUAL'inLFS.LowernumberofGCSEincludesindividualswhosehighestqualification

isGCSEandholdlessthan5GCSEs.HighernumberofGCSEincludesindividualswhosehighest

qualificationisGCSEandhold5ormorethan5GCSEs.

Source,LFS

.31

.32

.33

.34

.35

.36

Per

cent

age

of fu

ll-tim

e jo

b

-10 -5 0 5 10dur

Less than GCSE

.32

.34

.36

.38

.4

Per

cent

age

of fu

ll-tim

e jo

b

-10 -5 0 5 10dur

Lower number of GCSE.3

6.3

8.4

.42

.44

Per

cent

age

of fu

ll-tim

e jo

b

-10 -5 0 5 10dur


.35

.4.4

5

Per

cent

age

of fu

ll-tim

e jo

b

-10 -5 0 5 10dur

A-level

Table5.Effectofincreasingminimumwageonjobtypeforindividualswithless

thanGCSE

Dependent

variable

Full(lessthanGCSE) Job(lessthanGCSE)

Polynomial

terms



Constant 0.055

[0.042]

0.042

[0.058]

0.037

[0.102]

0.057

[0.042]

0.050

[0.058]

0.053

[0.102]

Linear 0.024

[0.091]

-0.033

[0.132]

-0.192

[0.326]

0.050

[0.091]

0.017

[0.132]

-0.197

[0.326]

Quadratic -0.039

[0.155]

0.082

[0.256]

0.002

[0.155]

0.041

[0.256]

Cubic 0.019

[0.251]

-0.060

[0.513]

0.023

[0.251]

-0.037

[0.514]

Observation 3613 1960 638 3613 1960 638

Notes:Thedependentvariableiswhetherindividualisinfull-timejoborbothfull-timeand

permanentjob.Theresultsarebasedondifferentpolynomialtermsandwindowlength.Control



Table6.Effectofincreasingminimumwageonindividual’schoiceofjobtype:

D-GGCSE

Dependent

variable

Full(D-GGCSE) Job(D-GGCSE)

Polynomial

terms



Constant 0.015

[0.094]

-0.114

[0.387]

-0.112

[0.237]

0.030

[0.094]

-0.091

[0.132]

0.063

[0.246]

Linear -0.126

[0.199]

-0.269

[0.291]

0.739

[0.806]

-0.025

[0.197]

0.038

[0.290]

1.06

[0.829]

Quadratic -0.473

[0.338]

0.195

[0.565]

-0.127

[0.331]

0.347

[0.566]

Cubic 0.168

[0.054]

-0.544

[1.147]

0.485

[0.540]

-0.387

[1.143]

Observation 761 405 119 761 405 119






5-GCSE

Dependent

variable

Full(5-GCSE) Job(5-GCSE)

Polynomial

terms



Constant 0.025

[0.054]

0.019

[0.075]

0.043

[0.139]

0.031

[0.054]

0.050

[0.075]

0.094

[0.137]

Linear 0.066

[0.118]

0.017

[0.176]

0.618

[0.459]

0.138

[0.118]

0.150

[0.175]

0.754*

[0.451]

Quadratic -0.114

[0.206]

0.242

[0.348]

0.018

[0.203]

0.294

[0.345]

Cubic 0.237

[0.336]

0.80

[0.691]

0.416

[0.331]

0.901

[0.686]

Observation 2224 1192 388 2224 1192 388


permanentjob.“5-”includesindividualswithlessthan5GCSEs.Theresultsarebasedon





A-CGCSE

Dependent

variable

Full(A-CGCSE) Job(A-CGCSE)

Polynomial

terms



Constant 0.169***

[0.048]

0.164**

[0.068]

0.156

[0.118]

0.166***

[0.048]

0.180**

[0.066]

0.116

[0.115]

Linear 0.193*

[0.104]

0.192

[0.152]

0.840**

[0.393]

0.225**

[0.104]

0.180

[0.151]

0.933**

[0.383]

Quadratic 0.087

[0.179]

0.460

[0.297]

0.059

[0.177]

0.343

[0.294]

Cubic 0.575**

[0.291]

0.825

[0.602]

0.505*

[0.288]

0.937

[0.594]

Observation 2841 1545 524 2841 1545 524






5+GCSE

Dependent

variable

Full(5+GCSE) Job(5+GCSE)

Polynomial

terms



Constant 0.297***

[0.071]

0.225**

[0.096]

0.250

[0.163]

0.292***

[0.071]

0.229**

[0.094]

0.188

[0.158]

Linear 0.202

[0.149]

0.211

[0.211]

0.582

[0.535]

0.209

[0.149]

0.167

[0.209]

0.608

[0.526]

Quadratic 0.085

[0.249]

0.492

[0.405]

0.020

[0.247]

0.287

[0.401]

Cubic 0.074*

[0.404]

0.034

[0.839]

0.552

[0.402]

0.267

[0.830]

Observation 1378 758 281 1378 758 281


permanentjob.“5+”includesindividualswith5ormorethan5GCSEs.Theresultsarebasedon




the national minimum wage in recession evidence from uk/file/a2_1_xu.pdf · the national minimum...

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