The Effects of youth minimum wage on labour market and schooling outcomes: evidence from Turkey

Küçükbayrak, Müşerref
This study analyzes the impact of youth minimum wage policy on labour market and schooling outcomes in Turkey based on a quasi-experimental approach. Before January 2014, minimum wage was determined according to the age of a worker. Young workers under 16 years of age were entitled to get a lower pay. This created a cut-off at the wages paid to workers based on this age. Differentiation of minimum wage was eliminated in 2014. Exploiting this cut-off, we use an RD design to study the effects of minimum wage for 15-16-year-old males on the outcomes variables for being employee, employment, unemployment, labour force participation, being in education and being neither in employment nor in education. We employ Survey of Income and Living Conditions in Turkey. Indeed, we take 12 months before and after the change in the minimum wage policy, thereby covering 2013 January- 2014 December. In this study, we develop two models. In the first one, we follow a conventional RD methodology. The second one extends the first by adding a difference-in-differences aspect to RD, thereby forming a difference-in-discontinuities model. Both models are compatible regarding the empirical findings. The results of the difference-in-discontinuities model suggest that change in probability of finding a job is 0.03-0.06 pp less for 15-year-old males from 2013 to 2014, relative to 16-year-old males. Moreover, change in probability of being in labour force is 0.01-0.03 pp less, but the change in probability of unemployment is 0.02-0.03 pp more for the younger group. This model also reveal that minimum pay encourages young males to attend school, but raises the incidence of being neither in employment nor in education among them.