The impact of a minimum wage increase on employment: evidence from Ireland

The minimum wage in Ireland increased every year from 2016 to 2025. We investigate whether these minimum wage increases led to a higher likelihood of minimum wage employees becoming unemployed or inactive. To do this, we implement a difference-in-differences methodology that compares the changes in employment outcomes of minimum wage employees to higher-paid employees up to six months following a minimum wage change.

We find no evidence that recent minimum wage increases in Ireland increased the likelihood of minimum wage employees losing their jobs. While minimum wage employees are generally more likely to enter non-employment than higher-paid workers, the likelihood of this happening did not increase following increases  to the minimum wage. Furthermore, no pattern emerges with respect to the magnitude of the minimum wage increase. In some years, the minimum wage increase was relatively large, while in other years it was small. However, larger minimum wage increases over this period did not coincide with a higher likelihood of minimum wage employees entering non-employment. 

In addition to the full ‘adult’ minimum wage rate, employees aged under 20 can earn an age-based, sub-minimum youth wage. This means that young minimum wage employees can ‘age into’ a higher minimum wage band. For example, an employee aged 18 is entitled to 80 per cent of the full adult minimum wage rate. Upon turning 19, they are entitled to 90 per cent of the full rate, and upon turning 20, they are entitled to the full adult minimum wage rate. We also exploit this feature of Irish minimum wage policy to evaluate the causal effect of ‘ageing into’ a higher minimum wage band. To do this, we implement a difference-in-differences methodology that compares the outcomes of sub-minimum youth wage employees that experience a birthday (i.e. whose age changes from one quarter to the next) to sub-minimum youth wage employees whose age stays 
the same. 

We find that, on average, young workers that ‘age into’ a higher minimum wage band did not experience an increased likelihood of job loss in the quarter directly following their birthday. When looking at differences over time, there is some evidence of job loss in the earlier time period (2016–2020); during this period,  sub-minimum youth wage employees that experienced a birthday from one quarter to the next were 15 percentage points more likely to enter non-employment than sub-minimum youth wage employees whose age stayed the same. However, a caveat is that this result is based on a relatively small sample size. For the later years (2021–2025), there was no statistically significant impact. 

Note that there are several potential channels of adjustment by employers following a minimum wage increase. One potential adjustment, which is the focus of this study, is the possibility that employers lay off existing minimum wage workers. Other channels of adjustment relate to reductions in hiring new staff, reductions in hours, a reduction in profits or an increase in prices. While several previous studies have found reductions in hours following a minimum wage increase in Ireland, the remaining channels of adjustment for Irish firms remain relatively under-researched, primarily due to data constraints. Nonetheless, these channels of adjustment present a very useful avenue for future research on Irish minimum wage policy.