Baccalauréat Section Européenne, Juin 2002

Discipline Non linguistique: Sciences Economiques et Sociales

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Preparation : 20 minutes

Oral exam : 20 minutes, 10 minutes to answer the question, and 10 minutes for discussion.

Using the document and your knowledge, make a structured answer of the following question.

Subject n°15 :

[…] There are great differences in minimum wages from country to country (see chart). In the Netherlands, the minimum has declined sharply over time when compared with the median wage. Britain’s planned minimum wage will also be quite low at around 45% of median earnings, according to estimates by the Low Pay Commission. In theory, a relatively high minimum wage should have a greater impact on aggregate employment than a relatively low one. Unfortunately, the OECD is unable to say whether there is a level at which the minimum wage turns into a drag on total employment.

The impact is clear, however, for the young. Workers younger than 25, who generally have few skills and little experience, tend to have much higher unemployment rates than older workers. Unemployment among America’s under-25s averaged 11% last year, three times the rate among workers over 25. In France, the unemployment rate for workers under 25 was a shocking 28%. Minimum wages are one explanation. The OECD study—which considers data for 1975 to 1996 from nine countries, including America, Japan, France, Spain and the Netherlands—finds that a 10% rise in the minimum wage reduces teenage employment by between 2% and 4% in both high and low minimum-wage countries. Whatever the level of the minimum wage, the OECD says, it reduces their job opportunities.

Governments may be able to minimise the damage by setting minimum wages at low levels, with exemptions or reduced rates for younger workers. America and France both do this, and Britain intends to. But such “sub-minimum wages” or “training wages” may be less effective than many policymakers suppose. In America, the minimum wage for adult workers was 39% of median earnings in 1997, but the special low minimum wage for workers aged under 20 was equivalent to 53% of mean youth earnings. France’s main minimum wage is 59% of median earnings, but the minimum for 18-year olds is equal to 72% of mean youth earnings. These disparities make it less attractive for employers to hire the young. […]

Jun 25th 1998
From The Economist print edition