Relationship between Youth Unemployment and Minimum Real Wage: An Empirical Analysis of the Hungarian Labor Market Using Multivariate Least Squares Regression Analysis

One of the best known predictions of standard economic theory is that an increase of minimum wage decreases employment and thus job opportunities of low-skilled, low-experienced workers. This paper provides an in depth analysis of the dynamics of the Hungarian youth employment. An econometric model is set up, and a Multivariate Least Squares Regression Analysis was performed to describe and predict the market's behavior. It is found that if minimum real wage increases by one percent, youth unemployment will increase by approximately one percent as well. Therefore, the results of the regression analysis supports the theory. It is also shown how the financial crisis, investment, and the number of students studying at universities impact the labor market.