Does minimum wage reduce youth employment on regional labour markets in Poland?

Abstract

The main aim of the paper was to verify whether the changes in minimum to average wage ratio in Poland negatively affected youth (15-24 years old) employment rate. Moreover we tried to answer the question if this impact differs among regions. We analysed a model where changes in youth employment rate were the function of changes in minimum to average wage ratio as well as other (demand and supply) variables. The analyses were conducted on 16 Polish NUTS2 regions in 1999-2012. The analyses conducted in the paper showed that when we estimated the average impact of changes in minimum to average wage ratio on changes in youth employment rate the parameter was not significant. Changes in youth employment were driven mostly by changes in business cycle and in school enrolment ratio. After having checked for the regional variation of the determination of the youths’ employment rate we found that the impact of minimum on employment differed significantly among regions, both in terms of size and sign. The regions where youth employment rates were negatively affected in the whole period by changes in minimum to average wage ratio were the rural, less developed districts of Poland (Lubelskie and Podkarpackie). The results of our analyses indicate in regions with low productivity and low average wages the level of unique minimum wage may be too high. Low youth employment rates in those regions in Poland may not only result from insufficient aggregate demand but also from relatively high costs of employing young workers.