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Discontinuous Distributions and Missing Persons: The Minimum Wage and Unemployed Youth

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Author Info
Robert H. Meyer
David A. Wise

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Abstract

The effects of minimum wage legislation on the employment and wage rates of youth are estimated using a new statistical approach. We find that without the minimum, not only would the percent of out-of-school youth who are employed be 4 to 6 percent higher than it is, but also that these youth would earn more. In particular, the expected hourly earnings of youth with market wage rates below the 1978 minimum are 10 percent lower with the minimum than they would be without it. Thus, an effect of the minimum is to increase the concentration of non-employment among low-wage workers and to reduce their earnings relative to higher wage workers as well. The minimum wage accounts for possibly a third of the difference between the employment rates of black and white youth, according to our results. Our methodology is based on parameterization of the effect of the minimum on the distribution of "market" employment outcomes and market wage rates that would exist in the absence of the minimum. A concomitant of the estimation procedure is joint estimation of market wage and employment functions that would pertain if there were no minimum.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0711.

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Date of creation: Jul 1981
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Handle: RePEc:nbr:nberwo:0711

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  1. Natalya Y. Shelkova, 2008. "Low-Wage Labor Markets and the Power of Suggestion," Working papers 2008-33, University of Connecticut, Department of Economics, revised Dec 2008. [Downloadable!]
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  2. C. J. Flinn, . "Interpreting Minimum Wage Effects on Wage Distributions: A Cautionary Tale," Institute for Research on Poverty Discussion Papers 1214-00, University of Wisconsin Institute for Research on Poverty. [Downloadable!]
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  3. Diego Angel-Urdinola, 2008. "Can a minimum wage increase have an adverse impact on inequality? Evidence from two Latin American economies," Journal of Economic Inequality, Springer, vol. 6(1), pages 57-71, March. [Downloadable!] (restricted)
  4. Zvi Eckstein & Suqin Ge & Barbara Petrongolo, 2006. "Job and Wage Mobility in a Search Model with Non-Compliance (Exemptions) with the Minimum Wage," IZA Discussion Papers 2076, Institute for the Study of Labor (IZA). [Downloadable!]
  5. Richard Dickens & Stephen Machin & Alan Manning, 1994. "The Effects of Minimum Wages on Employment: Theory and Evidence from the US," NBER Working Papers 4742, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Laroque, Guy & Salanié, Bernard, 1999. "Breaking Down Married Female Non-Employment in France," CEPR Discussion Papers 2239, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  7. Sara Lemos, 2004. "A Menu of Minimum Wage Variables for Evaluating Wages and Employment Effects: Evidence from Brazil," Discussion Papers in Economics 04/3, Department of Economics, University of Leicester. [Downloadable!]
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  8. Coen N. Teulings, 1998. "The Contribution of Minimum Wages to Increasing Wage Inequality," Tinbergen Institute Discussion Papers 98-093/3, Tinbergen Institute. [Downloadable!]
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  9. Sara Lemos, 2006. "Minimum Wage Effects in a Developing Country," Discussion Papers in Economics 06/1, Department of Economics, University of Leicester. [Downloadable!]
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  10. Portugal, Pedro & Cardoso, Ana Rute, 2002. "Disentangling the Minimum Wage Puzzle: An Analysis of Worker Accessions and Separations," IZA Discussion Papers 544, Institute for the Study of Labor (IZA). [Downloadable!]
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  11. Cardoso, Ana Rute & Portugal, Pedro, 2001. "Disentangling the Minimum Wage Puzzle: An Analysis of Job Accessions and Separations from a Longitudinal Matched Employer-Employee Data Set," CEPR Discussion Papers 2844, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  12. Richard B. Freeman, 1981. "Have Black Labor Market Gains Post-1964 Been Permanent or Transitory?," NBER Working Papers 0751, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  13. Guy Laroque & Bernard Salanie, 2002. "Labour market institutions and employment in France," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 17(1), pages 25-48. [Downloadable!]
  14. Mirco, Tonin, 2006. "The Effects of the Minimum Wage in an Economy with Tax Evasion," Seminar Papers 747, Stockholm University, Institute for International Economic Studies. [Downloadable!]
  15. Alan L. Gustman & Thomas L. Steinmeier, 1989. "A Model for Analyzing Youth Labor Market Policies," NBER Working Papers 1621, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  16. Coen N. Teulings, . "Aggregation Bias in Elasticities of Substitution and the Minimum Wage Paradox," Tinbergen Institute Discussion Papers 98-118/3, Tinbergen Institute. [Downloadable!]
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  17. Flinn, Christopher J., 2003. "Minimum Wage Effects on Labor Market Outcomes under Search with Bargaining," IZA Discussion Papers 949, Institute for the Study of Labor (IZA). [Downloadable!]
  18. Lemos, Sara, 2004. "Are Wage and Employment Effects Robust to Alternative Minimum Wage Variables?," IZA Discussion Papers 1070, Institute for the Study of Labor (IZA). [Downloadable!]
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