From January 1, 1987, the legal minimum wage for workers aged 18 and 19 in Portugal was uprated to the full adult rate, generating a 49.3% increase between 1986 and 1987 in the legal minimum wage for this age group. This shock is used as a ?natural experiment? to evaluate the impact of the minimum wage change on teenagers? employment by using a large firm level micro-data set. It is shown that by comparing the employment growth of 18-19 year old workers with their 20-25 year old counterparts one can identify the employment effects of the minimum wage hike. The same comparisons are done with 30-35 year old workers. This study finds that the rise in the minimum wage significantly reduced employment. This conclusion is reinforced by evidence showing that these employment effects are concentrated in firms more likely to be affected by the change in the law.

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Research Centre for Economic Policy (OCFEB)

Pereira, S. C. (2003). The impact of minimum wages on youth employment in Portugal. Retrieved from