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Minimum Wages, Employment, and College Enrollment

Author

Listed:
  • Lance Wescher
  • Travis Hutchinson
  • Anna Rannou

Abstract

Most studies of the effects of minimum wage laws look exclusively at the labor market. This article investigates the less-researched topic of the effects of a minimum wage increase on enrollment in undergraduate higher education institutions in the United States. With a higher opportunity cost of pursuing an education given a higher minimum wage, potential students may opt to work instead of attend college. Conversely, if an increase in the minimum wage raises the unemployment rate for young workers, more people may enroll in college, as they are unable to find employment. Using restricted geocode variables and panel data from National Longitudinal Survey of Youth (NLSY97) over a period of time in which every state saw an increase in its effective minimum wage, we find that higher minimum wages do correspond to lower levels of college enrollment. We use a multinomial probit model to examine how tradeoffs are made between employment and college enrollment. Finally, we examine the transition path between college enrollment and employment. JEL Classification : I23, J24, and E24.

Suggested Citation

  • Lance Wescher & Travis Hutchinson & Anna Rannou, 2019. "Minimum Wages, Employment, and College Enrollment," The American Economist, Sage Publications, vol. 64(1), pages 3-18, March.
    • Handle: RePEc:sae:amerec:v:64:y:2019:i:1:p:3-18
    DOI: 10.1177/0569434518787485
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    References listed on IDEAS

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    More about this item

    Keywords

    minimum wage; human capital; college enrollment;
    All these keywords.

    JEL classification:

    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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