ECO339 ASSIGNMENT

1.0 Introduction
The minimum wage debate also continues in the area of labour economics, particularly about its
effect on youth employment. Teenage employers The key question addressed in this paper is
how minimum wage policies affected teenage employment ratios across Canadian provinces
from 2001 to 2019. Featuring a rich dataset of observations, the study explores this relationship
between minimum wage levels and the youth labour market by using a regression model based
on the methodology developed by Baker, Benjamin, and Stanger (1999).

This paper shows a negative impact of minimum wage on teenage employment. Further controls
showed how sensitive youth labour markets are to broader economic trends. To reflect the
delayed response of employment to policy changes, lagged minimum wage terms are included in
the study. These results are consistent with earlier Canadian evidence, strengthening the
prevailing consensus that there is a disemployment effect, especially among teenagers.

With nuanced economic controls and an extended temporal framework for analyzing policy
impacts, this study adds to the discourse. It highlights the importance of policy debate which
deals with the coordination between wage growth aspirations and employment prospects for
vulnerable demographic groups. The paper's perspectives are an important basic building block
for policy-making so that wage regulations come to play not just a role in achieving fair
compensation but also in ensuring vibrant employment opportunities for Canadian youth.

2.0 Past Research

Empirical studies of minimum wage policies have made very rapid progress during this period.
Many recent studies employ panel data to capture the additional complexities introduced by
different regional minimum-wage levels, and their time evolution. However, this analytical
development is very important, especially considering the different minimum wage standards
across jurisdictions. They traditionally use employment rates or growth, and unemployment rates
as dependent variables, with indices comprising real minimum wage measures and relative ones
such as the adult minimum wage ratio (Bazen & Skourias 1997; Card 1992).
The unpopularity of lagged minimum wage terms in real life has been corroborated by literature.
Neumark and Wascher (1992) found that they significantly negatively influence the
employment-to-population ratio, a point hard to miss in Campolieti's (2020) meta-analysis of
Canadian studies. The Canadian view seems to be the generally accepted one, namely, that there
is a negative relationship between minimum wages and youth employment. Studies across a
range of countries indicate that impacts on employment vary from negative in some places to
negligible in others (Neumark and Wascher 2004; Bazen and Skourias, 1997) note that the
diversity of these effects across OECD countries hints at country-specific heterogeneity.

Moreover, the effects of minimum wage policies spread far into labour mobility and human
capital investment. Probing into how minimum wage adjustments brought about labour market
transitions, and what impact these have on the propensity for new hires to learn their trade on the
job, Mincer (1976) laid bare the numerous ways in which such wage regulations affect labour
activities. The effectiveness of minimum wage policies as anti-poverty measures is debated,
however. Minimum wage hikes may not succeed in reducing poverty levels or improving living
conditions (Burkhauser and Sabia 2007). The efficacy of higher minimum wages is thus worth
questioning.

3.0 Empirical framework

This study uses data that comes from rebasing labour force surveys to the 2006 census
population. This is a multi-provincial survey year-month survey dataset for the individual-
province-month level. Moreover, including 17,375,851 samples across Canada from January
2001 to December 2019. The survey comprises a rich dataset providing details on each
individual’s demographics—age brackets, sex, education level, hourly pay, labour force
participation, and labour union affiliation. Moreover, it presents the breadth of provincial wage
and labour market data like the minimum wage for each month per province, the unemployment
rate for those aged between 25 and 54 years, and monthly wages by province. These are all
important factors that allow analysis of labour market trends as well as the effects of minimum
wage policies in Canada.
Regression is then performed using a dummy for low-wage variable on a set of worker’s
characteristics to estimate the determinants of low-wage employment in Canada while
controlling for province-fixed effects. In Table 1, the regression results show statistically
significant results for all socio-demographic variables. The estimated results in the negative
coefficient on age_12 indicate that among young employees more often one can meet workers
who earn very little money. Such a view is consistent with the fact that junior personnel are
predominantly associated with entry-level roles which pay poorly. The analysis emphasizes how
this particular cohort is susceptible in terms of wages, thereby pointing out the confluence of age
and wages. The positive coefficient for the sex variable also shows some gender disparities
concerning low-wage employment. This implies that there are greater odds of certain gender
groups, mostly females, in low-wage jobs as compared to this other group This reveals the
persistence of gender gaps in labour, highlighting the significance of policies targeting wage
disparities. One of the important factors is that the emergence of educ90 shows negative
coefficient, indicating that the higher the education level, the lower the probability of working in
low-paying jobs. This emphasizes how education gives opportunities to obtain high-paid jobs,
thus providing reasons for improving learning chances to leave low-paid work. Llfsstat also
shows a negative coefficient, showing that some labour force categories are connected with low-
wage jobs. This seems to protect workers from having low-wage employment due to the benefits
of collective bargaining. Additionally, firms where the workers are less likely to have low wages
are smaller firms. It may indicate different wage structures and employment conditions in small
institutions. To sum up, this regression shows that younger women, with lesser education levels,
certain occupations like farm workers, non-union workers and small business employees are
more likely to receive a low wage.

The study utilizes a dataset encompassing 9 Canadian provinces: For the period of 2001 to 2019.
The dependent variable is the teenage employment ratio. It is an indicator of employment among
teenagers expressed as a quotient of employed teenagers for a population of teenagers. Average
hourly adult minimum wage, the main dependent variable for this analysis taken every month for
every province where the survey was carried out. To control the provincial macroeconomic
environment in each month, the regression model will include two additional variables: the
unemployment rate and the rate of prime-aged males (between 25 to 54 years old). The above is
a measure of the labour supply effect expressed as a percentage of teens to the total population at
working age (between 15 and 64 years old). Table 2 presents summary statistics on the
employed and predictor variables in this analysis.

The dynamics of how Hourly minimum wages change over time are shown in Figure 1 for 9
provinces across Canada. Overall, all the provinces barring British Columbia show upward
trends. This illustrates changing wage policy at a provincial level, which is essential in analyzing
labour market changes across this period. Some of these variables are included in the study as
descriptive statistics and this gives a general feel of the labour market conditions and the policies
involved.

Following the based model in Baker et. al. (1999), this paper will run the following regression
for province I and at time t (year-month):

#$% ($%

𝐼𝑌!" = 𝛼 + β𝑊!" + γ𝑋!" + + δ' 𝑃𝑅𝑂𝑉! + + 𝜃" 𝑀𝑂𝑁𝑌𝑅" + 𝜖!" ,

!&% "&%

where 𝑌!" is the teenage employment ratio, 𝑊!" is calculated using minimum wage divided by the
provincial average hourly wage. X') are control variables that capture the effect of
macroeconomic conditions in each province during each month, including the unemployment
rate among prime-aged males, and the percentage of teenagers out of the total population.
Moreover, this regression will include province fixed effect 𝑃𝑅𝑂𝑉! and year-month fixed effects
𝑀𝑂𝑁𝑌𝑅. The last term is the error term denoted as 𝜖!" .

4.0 Result
The regression results in Table 3 suggest a clear negative association between the ratio of
minimum to average wage and teenage employment ratios in Canada. Model (1) shows that the
coefficient of -0.238 for R_minw_avgw is significant at 1 % confidence in a statistical sense,
implying that as the minimum wage rises proportionately to average wages, then there is less
teenage employment. This basic finding is consistent with the claim that an increase in minimum
wages may hurt teenagers 'employment chances. The pattern was first discovered by Baker,
Benjamin, and Sanger (1999) in a foundational Canadian study on this topic. The control
variables provide another angle to the story. However, the prime-aged male unemployment rate
has a highly negative coefficient (-0.768), reflecting its sensitivity to changes in the wider
economic environment, especially labour demand. The ratio of teenagers to working-age people
has a negative coefficient in the second specification model alone (-0.655), and thus labour
supply factors play an important role. In Model (2), the lagged minimum wage variable is added
to control for the previous provincial trend in min wage. It turns out the lagged minimum wage
does have a negative impact (-0.0185) on teenage employment, indicating the delayed effects of
adjustments to wage policy upon the labour market. Moreover, the coefficients on minimum
wage become less negative, further confirming that part of the adverse effects on employment
found in the model (1) is due to the stickiness in wage given the time required for contract
negotiations.

This is compared with the closest literature, namely Baker, Benjamin and Stanger (1999), which
shows consistency in terms of direction but significant differences in magnitude. However, the
current study shows that this effect is slightly attenuated. The magnitude of the coefficients in
this analysis is also generally consistent with the body of literature that often presents negative
effects on youth employment from increases in minimum wages. For example, Neumark and
Wascher (1992; 2007) cite negative elasticities for teenage employment-to-population ratios, but
the coefficients found in this study are not as large. This could simply be because some of the
variations in employment described by minimum wage changes are probably absorbed by
additional control variables which were incorporated into the model. The negative coefficient for
the prime-aged male unemployment rate sits well with literature stressing the impact of
economic conditions on youth employment. It reinforces the sense that teenagers 'employment
opportunities are closely tied to the overall state of the labour market. This was suggested in
other studies by Myatt and McDonald (2010), who also consider this broader economic
environment in their analysis of minimum wage effects.

5.0 Conclusion
Building on the work of Baker, Benjamin and Stanger (1999), this paper provides an empirical
update exploring the effects of minimum wage changes on employment among Canadian
teenagers. The study, which uses more recent data up to 2019, presents a new angle on the
debate. While it finds that minimum wage increases continue to be negatively correlated with
teenage employment in line with the results of previous studies, this is tempered by present-day
economic conditions.

The research contributes to the literature by stressing that despite changes in economic
conditions and labour market structures, minimum wage policies are still a determinant of youth
labour market outcomes. It also emphasizes the need to take temporal lags into account in policy
effects and points out that the labour market's response time to changes in the minimum wage is
unlikely to be identical from day one.

Given economic disruptions combined with changes in the labour market participation rate, this
work creates a path for subsequent research to examine the long-term impact of minimum wage
policies. Other research could explore the relationship between minimum wage legislation,
technological innovation, globalization, and the educational levels of young workers. This would
assist us in understanding the effects of policy on labour market entry points for young people.
References

Bazen, S., & Skourias, N. (1997). "Is There a Negative Effect of Minimum Wages on Youth
Employment in France?" *European Economic Review*, 41(3-5), 723-732.

Battle, K. (2003). "Minimum Wages and Maximum Wages: Can We Find a Policy That Helps
the Working Poor Without Hurting Them?" *Caledon Institute of Social Policy*.

Battle, K., & Torjman, S. (2012). "How to Redesign a Minimum Wage: Reflections on Working
Income Tax Benefit (WITB)." *Caledon Institute of Social Policy*.

Brown, C. (1988). "Minimum Wage Laws: Are They Overrated?" *Journal of Economic
Perspectives*, 2(3), 133-145.

Burkhauser, R. V., & Sabia, J. J. (2007). "The Effectiveness of Minimum-Wage Increases in

Reducing Poverty: Past, Present, and Future." *Contemporary Economic Policy*, 25(2), 262-
281.

Campolieti, M., Gunderson, M., & Riddell, C. (2006). “Minimum Wage Impacts from a
Prespecified Research Design: Canada 1981-1997.” *Industrial Relations*, 45(2), 195-216.

Campolieti, M. (2020). “Does an Increase in the Minimum Wage Decrease Employment? A

Meta-Analysis of Canadian Studies.” *Canadian Public Policy*, 46(4), 531-564.

Card, D. (1992). "Using Regional Variation in Wages to Measure the Effects of the Federal
Minimum Wage." *Industrial and Labour Relations Review*, 46(1), 22-37.

Carrington, W. J., & Fallick, B. C. (2001). "Do Some Workers Have Minimum Wage Careers?"
*Monthly Labour Review*, 124(5), 17-27.

Chapple, S. (1997). "The Impact of British Minimum Wage on Wages and Employment." *The
Manchester School*, 65(3), 304-323.

Dolado, J. J., Felgueroso, F., & Jimeno, J. F. (1996). "The Effects of Minimum Bargaining
Wages on Employment: Evidence from Spain." *European Economic Review*, 40(3-5), 827-
837.

Maloney, T., & Mendez, I. (2004). "Measuring the Impact of Minimum Wages: Evidence from
Latin America." In J. A. Ocampo (Ed.), *The Economic Development of Latin America since
Independence*.

Mincer, J. (1976). "Unemployment Effects of Minimum Wages." *Journal of Political

Economy*, 84(4, Part 2), S87-S104.

Mincer, J., & Leighton, L. (1980). "Effect of Minimum Wages on Human Capital Formation." In
S. Rottenberg (Ed.), *The Economics of Legal Minimum Wages*.
Myatt, A., & McDonald, J. T. (2010). "Minimum Wages and School Enrollment of Teenagers: A
Look at the Canadian Experience." *Economics of Education Review*, 29(1), 117-126.

Neumark, D., & Wascher, W. (1992). "Employment Effects of Minimum and Subminimum
Wages: Panel Data on State Minimum Wage Laws." *Industrial and Labour Relations Review*,
46(1), 55-81.

Neumark, D., & Wascher, W. (2004). "Minimum Wages, Labour Market Institutions, and Youth
Employment: A Cross-National Analysis." *Industrial and Labour Relations Review*, 57(2),
223-248.

Pereira, S. C. (2003). "The Impact of Minimum Wages on Youth Employment in Portugal."

*European Economic Review*, 47(2), 229-244.

Portugal, P., & Cardoso, A. R. (2006). "Disentangling the Minimum Wage Puzzle: An Analysis
of Worker Accessions and Separations." *Journal of the European Economic Association*, 4(5),
988-1013.

Sabia, J. J., Burkhauser, R. V., & Hansen, B. (2012). "Are the Effects of Minimum Wage
Increases Always Small? New Evidence from a Case Study of New York State." *Industrial and
Labour Relations Review*, 65(2), 350-376.

Sen, A., Rybczynski, K., & Van De Waal, C. (2011). "Teen Employment, Poverty, and the
Minimum Wage: Evidence from Canada." *Labour Economics*, 18(1), 36-47.
Appendix: Table and Figure

Source SS df MS Number of obs = 11071150

F(15, 11071134) > 99999.00
Model 758745.566 15 50583.0378 Prob > F = 0.0000
Residual 2007634.02 11071134 .18133951 R-squared = 0.2743
Adj R-squared = 0.2743
Total 2766379.58 11071149 .249872853 Root MSE = .42584

near_minwage Coef. Std. Err. t P>|t| [95% Conf. Interval]

age_12 -.0457626 .0000541 -845.33 0.000 -.0458687 -.0456565

sex .1703111 .0002574 661.67 0.000 .1698066 .1708156
educ90 -.0926925 .0000889 -1042.51 0.000 -.0928667 -.0925182
lfsstat -.0387649 .0004692 -82.62 0.000 -.0396844 -.0378453
union .0982884 .0001519 647.09 0.000 .0979907 .0985861
firmsize -.046562 .0001148 -405.68 0.000 -.0467869 -.046337

Table 1. Factorsprov
determine whether receiving near minimum wage

Variable Obs Mean Std. Dev. Min Max

Teenage_emp_rate 2,052 0.4305 0.0858 0.1534 0.6891
R_minw_avgw 2,052 0.4211 0.0405 0.3053 0.5206
Unemp_prage_M 2,052 0.0783 0.0483 0.0159 0.3607
R_teen_workingage 2,052 0.1062 0.0096 0.0797 0.1451

Table 2. Summary of Key Variables

 (1) (2)
VARIABLES Teenage_emp_rate Teenage_emp_rate

R_minw_avgw -0.238*** -0.152*

(0.0426) (0.0798)
Unemp_prage_M -0.768*** -0.760***
(0.0639) (0.0632)
R_teen_workingage -0.263 -0.665***
(0.188) (0.200)
Lag_min_wage -0.0185***
(0.00320)
Constant 0.483*** 0.482***
(0.0287) (0.0285)

Observations 2,052 2,043

Province FE Yes Yes
Year-month FE Yes Yes
R-squared 0.802 0.806

Table 3. Regression results

 Newfoundland Nova Scotia New Brunswick
15
10
5

Quebec Ontario Manitoba

(mean) minwage
15
10
5

Saskatchewan Alberta British Columbia

15
10
5

2000m12005m12010m12015m12020m1
2000m12005m12010m12015m12020m1
2000m12005m12010m12015m12020m1
Time
Graphs by Province

Figure 1. Hourly Minimum Wage across Provinces in Canada (2001-2019)

Appendix: STATA Code
clear
use "/Users/eco339/lfs0119rr.dta",replace
describe
******* (A) Analysis of Low Wage Workers***********
histogram hrlyearn, title("Distribution of Hourly Earnings")
*graph box hrlyearn, over(educ90) title("Hourly Earnings by Education Level")
*graph box hrlyearn, over(sex) title("Hourly Earnings by Education Level")

*whether near min wage

gen wage_diff = hrlyearn - minwage
sum wage_diff,detail
histogram wage_diff
gen low_wage=0
*dummy=1 if wage below zero wage
replace low_wage=1 if low_wage <=1
tabulate sex low_wage
tabulate sex low_wage , summarize(hrlyearn)
tabulate age_12 low_wage , summarize(hrlyearn)
tabulate union low_wage , summarize(hrlyearn)
*regression
//reg hrlyearn age_12 sex educ90 lfsstat union firmsize i.prov
reg low_wage age_12 sex educ90 lfsstat union firmsize i.prov

**********Generate additional variable***********

gen id = _n
gen date = ym(survyear, survmnth)
format date %tm
*survey on all working age population
*employed
tab lfsstat
gen employed=0
replace employed=1 if (lfsstat==1|lfsstat==2)
gen unemployed=0
replace unemployed=1 if (lfsstat==3|lfsstat==4|lfsstat==5)
*teengaer
gen teen=0
*teengaer employed
replace teen=1 if age_12==1 //15-19yrs
gen teen_emp=0
replace teen_emp=1 if (teen==1 & employed==1) //15-19yrs
*prime-age male
gen primeage_M=0
replace primeage_M=1 if (sex==1 & age_12!=1 &age_12!=2
&age_12!=9&age_12!=10&age_12!=11&age_12!=12)
*prime-age male unemployed
gen primeage_M_unemp=0
replace primeage_M_unemp=1 if (primeage_M==1 & unemployed==1)
*working age: all working age
gen working_aged=1

*************Generate sample***********
**aggregate at province-year-month level
collapse (sum) employed teen teen_emp primeage_M primeage_M_unemp working_aged ///
(mean) hrlyearn minwage provur avwage1559 avwage provmilk, by(prov date)

sort prov date

// Eis the employment ratio among teenagers;
// NW is the ratio of the minimum wage to the average hourly wage in manufacturing;
// Xit; business cycle effects and economic conditions:
// the prime-aged male unemployment rate,
// provincial real GDP
// ratio of the population of teenagers to the population of working-aged people;
// province and year dummy
* employment rate among teenagers
gen ratio_teen_emp = teen_emp / teen
* ratio of the population of teenagers to the population of working-aged people
gen ratio_teen_to_working_age = teen / working_aged
* prime-aged male unemployment rate (assuming you have the total number of unemployed
prime-aged males)
gen prime_age_unemp_rate = primeage_M_unemp/primeage_M
* ratio of the minimum wage to the average hourly wage
gen ratio_minw_avgw=minwage/hrlyearn
*province dummy
tabulate prov, generate(prov_dummy)
*year-month dummy
tabulate date, generate(date_dummy)

//Excludesion
drop if prov == 11//exclude Prince Edward Island

********summary of key variables*******

**minumum wage increase by province
use minwage_map.dta,replace

*in seperate plots

twoway line minwage date, by(prov) xtitle("Time")

*in one plot

// 10 -- Newfoundland
// 11 -- Prince Edward Island
// 12 -- Nova Scotia
// 13 -- New Brunswick
// 24 -- Quebec
// 35 -- Ontario
// 46 -- Manitoba
// 47 -- Saskatchewan
// 48 -- Alberta
// 59 -- British Columbia
twoway (tsline minwage if prov == 10) ///
///(tsline minwage if prov == 11) ///
(tsline minwage if prov == 12) ///
(tsline minwage if prov == 13) ///
(tsline minwage if prov == 24) ///
(tsline minwage if prov == 35) ///
(tsline minwage if prov == 46) ///
(tsline minwage if prov == 47) ///
(tsline minwage if prov == 48) ///
(tsline minwage if prov == 59),legend(off) xtitle(Time)

**Key variables used in the equation

summarize ratio_teen_emp ratio_minw_avgw prime_age_unemp_rate
ratio_teen_to_working_age

***********Regression*********
regress ratio_teen_emp ratio_minw_avgw prime_age_unemp_rate ratio_teen_to_working_age
i.prov i.date
outreg2 using "regression_results.doc", word noomit

sort prov date

xtset prov date
by prov: gen lag_min_wage = L.minwage
regress ratio_teen_emp ratio_minw_avgw prime_age_unemp_rate ratio_teen_to_working_age
lag_min_wage i.prov i.date
outreg2 using "regression_results.doc", append word noomit