Econometrics论文模板 – The Correlation Between Minimum Wage and Youth Unemployment: A Korean Case Study Research Proposal

Introduction

Youth unemployment in Korea has been on a rapid rise since 2013 while the overall unemployment has experienced a little change (Lee, 2017). Korean’s unemployment rate among high school graduates has been maintained at a comparatively stable level, a trend that is attributed to the rising number of service jobs (Park et al., 2020). However, the proportion of unemployed college graduates has been rising due to the comparatively slow rate of creating semi-professional and professional jobs. According to Lee (2017) youths (15-29)’s unemployment rose from 8% in the early 2000 to 10% in 2013. The proposed study will investigate the relationship between youth unemployment and minimum wage in Korea.  

Hypothesis

When minimum wage increase, youth unemployment increases too (positive correlation between the variables).

Theoretical Literature

According to Kim and Gieyoung (2018), minimum wage act as a price floor in an economy. It therefore set a level beyond the market equilibrium wage. Precence of minimum wage therefore skews the supply signal and demand in the labour market producing a situation of surplus supply of labour (Kaufman et al., 2020). This situation results in a case where there are more people willing to work compared to firms willing to hire them. As a result, an increase in minimum wage would exacerbate this impact and increase unemployment. Patridge and Partridge (1999) as cited in Manning (2021) proposed that minimum wage in effect isolates a section of the workforce that is willing to work for less than the minimum wage but unable to acquire employment due to the higher skilled workers that are attracted by the higher minimum wage and as result, minimum wage may function to redistribute jobs to higher skilled workers compared to redistributing income among the less skilled workers. 

Youths being the most susceptible to minimum wage fluctuations since most of them lack work experience forms the best population to study this concept. Due to limited experience, they would be typically be amongst the first group to be laid off thus forming a good indicator of studying the impact of minimum wage on unemployment

Proposed Methodology

In order to study correlation between minimum wage and youth employment, two models will be developed in MATLAB. The first model will be a simple linear regression model while the second model will be a multiple linear regression model. A simple linear regression model will have Korean’s youth unemployment as the dependent variable and actual minimum wage as the independent variable. In this study, youths will be all persons aged 15 to 28 who are actively seeking for employment but are still unemployed. In the regression model, logarithm of youth unemployment will be used in analysing percentage change in youth unemployment’s due to minimum wage.

Multiple linear regression that will be used in the study will take the form of

Where YUER refers to youth unemployment rate, Minwage is the minimum wage value similar to the one used in the simple linear regression model,  refers to the ratio youth unemployment to the overall population. The variable will be used as control variable for the general participation of youths in the labour market. The variable Unemp refers to the overall unemployment level of the Korean economy. This will be included as control for variations in economic conditions.

References

Chong Uk Kim, & Gieyoung Lim. (2018). Minimum Wage and Unemployment: An Empirical Study on OECD Countries. Journal of Reviews on Global Economics, 7, 1–9. https://ns1.6thsigmahosting.com/pms/index.php/jrge/article/view/5227

Kaufman, J. A., Salas-Hernández, L. K., Komro, K. A., & Livingston, M. D. (2020). Effects of increased minimum wages by unemployment rate on suicide in the USA. Journal of Epidemiology and Community Health, jech-2019-212981. https://doi.org/10.1136/jech-2019-212981

Lee, J. (2017). The labor market in South Korea, 2000–2016. IZA World of Labor. https://doi.org/10.15185/izawol.405

Manning, A. (2021). The Elusive Employment Effect of the Minimum Wage. Journal of Economic Perspectives, 35(1), 3–26. https://doi.org/10.1257/jep.35.1.3

Park, S., Kang, M.-Y., & Lee, J.-H. (2020). Precarious Employment as Compared With Unemployment Reduces the Risk of Depression in the Elderly in Korea. Journal of Occupational and Environmental Medicine, 62(10), e559. https://doi.org/10.1097/JOM.0000000000001981

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