Monday, 8 February 2010

Youth rates re-revisited

Stephen Whittington (not Hickson!) usefully reminds me of prior regime shifts. Prior to 1994, no minimum wage applied to the under-20s; then, it increased to 60% of the adult rate. Next, 18-19 year olds were covered by the adult rate while the younger set were on 70 or 80% of the adult rate. And now everyone aged 15 and up is subject to the same minimum wage.

If I re-run things allowing for the four different regimes, I get the following.

PeriodCoefficientConstantImplied Youth unemployment rate if adult rate is 4.75%
No youth minimum wage at all1.984.5414%
60% of adult rate111.316%
18-19 year olds are adults, higher youth rate1.0510.616%
All on adult rate4.462.1223%

So when there was no youth rate at all, youth unemployment largely tracked as a small multiple of the adult rate; the youth rate pushed it to a level shift that tracked the adult unemployment rate; and, the current regime has youth unemployment at a much larger multiple of the adult rate.

Stephen also sends me data on the youth minimum wage as effective percentage of the average hourly rate; afraid I'm not going to have time to play much with that one. Down that route lies a replication and extension of Hyslop and Stillman which would make for a fine honours project, but for which I certainly don't have the time now!

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