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Effects of Higher Minimum Wages on Teen Employment and School Enrollment

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  • Mark D. Turner
  • Berna Demiralp

Abstract

Both Congress and the Senate recently passed legislation increasing the federal minimum wage from $5.15 to $6.15 per hour. Proposals to increase the federal minimum wage have lately received popular support from the public and politicians from "both sides of the aisle." Nonetheless, the research community continues to question the efficacy of increasing minimum wages, at both the state and federal levels. This study analyzes the effect of higher minimum wages on teen employment and school enrollment using a large, nationally representative longitudinal dataset, the Survey of Income and Program Participation. We show how recent minimum wage hikes affect teenagers in general and key demographic subgroups among the teenage population. Opponents of the minimum wage hike contend that minimum wage increases reduce employment and prompt some teens to drop out of school. Moreover, opponents maintain that a higher minimum wage has a more negative impact on younger teens, blacks and Hispanics compared to older teens, and nonblack and non-Hispanic teens. Proponents of the minimum wage hike argue that the job-loss effect to be either small or nonexistent. This research, summarized in Bernstein and Schmitt (1998), suggests that the benefits of minimum wage increases to low-wage workers and their families far outweigh the costs. Our results initially appear to suggest that the proposed minimum wage hike would significantly increase teen employment and would slightly reduce school enrollment. In addition, we find that the proposed minimum wage hike would decrease the probability of becoming idle, i.e., not-enrolled and not-employed, among the entire teenage population. However, consistent with Neumark and Wascher's 1995 study, our findings indicate that black and Hispanic teens and teens in central cities are more likely to become idle as a result of the proposed minimum wage increase.

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Bibliographic Info

Paper provided by Northwestern University/University of Chicago Joint Center for Poverty Research in its series JCPR Working Papers with number 198.

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Date of creation: 20 Jul 2000
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Handle: RePEc:wop:jopovw:198

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  1. Yoram Ben-Porath, 1967. "The Production of Human Capital and the Life Cycle of Earnings," Journal of Political Economy, University of Chicago Press, vol. 75, pages 352.
  2. Dickens, Richard & Machin, Stephen & Manning, Alan, 1999. "The Effects of Minimum Wages on Employment: Theory and Evidence from Britain," Journal of Labor Economics, University of Chicago Press, vol. 17(1), pages 1-22, January.
  3. David Neumark & William Wascher, 1995. "The Effects of Minimum Wages on Teenage Employment and Enrollment: Evidence from Matched CPS Surveys," NBER Working Papers 5092, National Bureau of Economic Research, Inc.
  4. Brown, Charles & Gilroy, Curtis & Kohen, Andrew, 1982. "The Effect of the Minimum Wage on Employment and Unemployment," Journal of Economic Literature, American Economic Association, vol. 20(2), pages 487-528, June.
  5. Janet Currie & Bruce Fallick, 1993. "The Minimum Wage and the Employment of Youth: Evidence from the NLSY," NBER Working Papers 4348, National Bureau of Economic Research, Inc.
  6. Michael T. Shannon & Charles M. Beach, 1995. "Distributional Employment Effects of Ontario Minimum-Wage Proposals: A Microdata Approach," Canadian Public Policy, University of Toronto Press, vol. 21(3), pages 284-303, September.
  7. Alison J. Wellington, 1991. "Effects of the Minimum Wage on the Employment Status of Youths: An Update," Journal of Human Resources, University of Wisconsin Press, vol. 26(1), pages 27-46.
  8. Peracchi, Franco & Welch, Finis, 1995. "How representative are matched cross-sections? Evidence from the Current Population Survey," Journal of Econometrics, Elsevier, vol. 68(1), pages 153-179, July.
  9. Baker, Michael & Benjamin, Dwayne & Stanger, Shuchita, 1999. "The Highs and Lows of the Minimum Wage Effect: A Time-Series Cross-Section Study of the Canadian Law," Journal of Labor Economics, University of Chicago Press, vol. 17(2), pages 318-50, April.
  10. Ronald G. Ehrenberg & Alan J. Marcus, 1982. "Minimum Wages and Teenagers' Enrollment-Employment Outcomes: A Multinomial Logit Model," Journal of Human Resources, University of Wisconsin Press, vol. 17(1), pages 39-58.
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