RDP 2018-06: The Effect of Minimum Wage Increases on Wages, Hours Worked and Job Loss 6. Data and Descriptive Statistics

6.1 Data

I estimate Equation (1) using job-level data from the Australian Bureau of Statistics (ABS) Wage Price Index (WPI) survey. This survey includes 3,000 firms per quarter, with each firm being surveyed every quarter for five years, before being rotated out of the sample (roughly one-fifth of the sample is replaced each year). After being selected into the sample, a firm is asked to randomly select a certain number of jobs from their payroll records. The firm then reports information on each of these jobs over time. Around 18,000 jobs are included in the survey every quarter. Approximately 15–20 per cent of these jobs have their pay set exactly according to an award.

The WPI survey follows jobs, rather than employees (for example, a graduate economist at the Reserve Bank of Australia in the middle of the performance range). If the occupant of the job leaves the firm or moves to a different job within the firm, the ABS substitutes the job leaver with the employee who replaced her or an existing employee with the same job title. For this reason, my unit of analysis is the job.

My estimation sample includes all private sector jobs filled by an adult on an award rate. I exclude juniors, apprentices and trainees from my analysis, as it is too difficult to accurately infer their award wage adjustment. This is unfortunate because these groups may be particularly vulnerable to job loss following an increase in award wages. I also exclude jobs not within the scope of the federal industrial relations system after 2006, due to the uncertainty about what award wage adjustments such jobs experienced during this period of industrial relations reform. After these sample restrictions, I am left with a sample of 32,174 job-period observations spanning the 11 decisions over the period between 1998 and 2008. The key outcome variables I consider are:

  • Wages: the log of the job's hourly wage, excluding any wage changes due to changes in the job occupant's grade or performance.
  • Hours worked: the log of the ordinary-time hours paid for during the most recent pay period. This includes hours of paid leave (e.g. annual leave and sick leave) but excludes overtime hours.
  • Job destruction rate: a binary variable that equals one if job i had ceased by survey date t, conditional on the job existing six months earlier, and zero otherwise. This captures both redundancies and firm failure.

The estimates for wages and hours worked are conditional on the job being in the sample in the before period and after period for a given FWC decision. If a job is vacant or made redundant in either period it is dropped from the sample. This is not the case for the job destruction rate.

6.2 Descriptive Statistics

The award wage that applies to a job is typically a function of a number of factors, including the job's industry, skill requirements and location. To see how these job characteristics vary over the distribution, Table 1 presents the means of several variables at each decile of the award wage distribution. The mean hourly wage of jobs ranges from $13.80 in the lowest decile to $32.00 in the top decile (in 2009 dollars). Jobs in lower wage deciles are more likely to be casual, less skilled, with shorter working hours, and in smaller firms, relative to those in higher deciles. Award-wage earners are over-represented in certain industries, with the overall industry distribution in my sample broadly consistent with data from the ABS's survey of Employee Earnings and Hours.

Table 1: Descriptive Statistics – Sample Means
By wage decile in the before period, jobs paid an award wage, 1998–2008
  Wage decile
1 2 3 4 5 6 7 8 9 10
Hourly wage ($)(a) 13.8 14.6 15.0 15.4 15.8 16.4 17.2 18.3 20.7 32.0
Casual share (%) 56.5 40.1 31.8 45.6 43.6 29.8 23.9 21.6 16.8 6.1
Weekly hours worked(b) 26.3 26.1 28.0 27.0 27.3 29.4 28.9 28.9 30.0 31.1
Firm size (employees)(c) 324 357 346 384 324 338 378 348 370 502
Low skill share (%)(d) 57.2 68.6 57.7 47.4 41.5 27.6 38.5 28.0 15.4 1.1
Industry shares (%)                    
Manufacturing 7.3 5.0 5.1 3.2 2.5 5.1 3.4 2.8 2.0 1.2
Retail 9.4 4.2 13.0 10.5 16.9 11.3 5.7 3.8 3.6 1.5
Accomm, cafes & restaurants 32.3 31.8 25.8 41.9 16.7 16.9 15.5 18.2 11.6 3.0
Property & business services 11.5 29.3 14.4 10.6 12.4 10.8 25.7 19.1 16.7 5.8
Health & community services 11.1 7.9 14.9 18.8 27.0 25.2 22.4 26.3 32.2 39.7
Cultural & recreational services 7.6 4.1 3.3 1.3 2.1 3.1 3.3 4.9 5.1 2.4
Personal & other services 9.1 6.4 5.5 2.9 3.8 8.6 6.7 7.8 9.7 11.2
All other 11.7 11.3 18.0 10.7 18.6 18.9 17.4 17.0 19.1 35.1

Notes: (a) In 2009 Australian dollars, deflated using consumer price index; excludes casual loading
(b) Ordinary-time hours paid for, excluding overtime
(c) Total employment of the firm
(d) Includes the ‘Elementary clerical, sales and service workers’ and ‘Labourers and related workers’ occupational groups