Employment Effects of Three Rounds of Federal Minimum Wage Hikes

This paper presents event-study estimates of the effects of the 1990–1991, 1996– 1997, and 2007–2009 rounds of federal minimum wage hikes on the employment of teens and high school dropouts in states without super-federal minimum wages. In state-year panel data from the Current Population Survey, a control group of people ages 25–59 with at least a high school education generates counterfactual series that track teen and dropout employment rates quite well (outside the periods of wage hikes). Deviations from the counterfactual series in the post-hike period identify the employment effects of the minimum wage hikes. For the 1990–1991 and 2007–2009 rounds, the employment effects for teens and dropouts are negative, statistically significant, economically large, and robust to the treatment of trends and year effects. Differences by sex and race are small compared to the difference by age: disemployment effects for younger teens (ages 15–17) are twice the size of the effects for older teens (ages 18–19). Welfare reform contaminates analysis of the 1996–1997 round, but monthly estimates of the employment effects in that round resemble monthly estimates in the 1990–1991 round until welfare reform rolled out in the second half of 1997.