The long debate on the impact of the minimum wage relied on successive improvements in the theoretical background, data quality and empirical methods, leading by now to a certain consensus over one core result: the short-run impact of the minimum wage on employment, whether negative or positive, is small. Paradoxically, the extent of our lack of knowledge on other fronts was exposed. Indeed, we know remarkably less on the following issues, which will be addressed in this project:

1. What is the impact of the minimum wage on skill acquisition and the quality of jobs? Contradictory hypotheses have been put forth. On one hand, employers could shift into better quality jobs and provide more training to their workers after the increase in the minimum wage; investment in skill acquisition by workers could increase, if better skills were perceived as a requirement to access jobs. On the other hand, standard human capital theory predicts that firms will reduce investment in training after an increase in the minimum wage, since it prevents workers from taking wage cuts necessary to fund training; school enrolment could decline as teenagers would drop out to start working.

2. What are the longer-term impacts of the minimum wage? Its short-term employment consequences may be small, as suggested by all the debate that followed the seminal works of Card, Krueger and Katz (Card and Krueger, 1994, 1995; Katz and Krueger, 1992). However, how does exposure to minimum wage at a certain point in time, namely upon entry into the labor market, affect the career prospects of workers, in terms of employment, wage progression, and job mobility? On one hand, potentially negative outcomes could be amplified in the longer-run. But longer-run effects could also counter some of the potential adverse short-run effects, for example if minimum wages led to increasing skill acquisition.

3. What role can the minimum wage have closing the gender pay gap? Rising educational attainment and more continuous labor market attachment by females have been pointed out as factors narrowing the gender pay gap, while the relevance of anti-discrimination policies has often been stressed. However, the potential role of the minimum wage closing the gender pay gap has deserved little attention.

Three factors enable us to go beyond what has been done in the previous literature concerning that set of issues. First of all, we rely on a longitudinal matched employer-employee dataset of remarkable quality, which follows for over 15 years every wage-earner in the Portuguese manufacturing and services private sector, and their firms. Secondly, we can explore a change in the legislation that yielded a quasi-natural experiment: a large increase in the mandatory minimum wage for a specific group of workers. In fact, in 1987 the minimum wage for workers aged 17 increased in Portugal by 50%, and by 33% for workers aged 18 or 19. Thirdly, the research team has wide expertise working with this dataset, a record of work related to the topics under scrutiny, and counts on the guidance of David Card as consultant.