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

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  • Robert H. Meyer
  • David A. Wise

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.

Suggested Citation

  • Robert H. Meyer & David A. Wise, 1981. "Discontinuous Distributions and Missing Persons: The Minimum Wage and Unemployed Youth," NBER Working Papers 0711, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:0711 Note: LS
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    1. Willis, Robert J & Rosen, Sherwin, 1979. "Education and Self-Selection," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 7-36, October.
    2. Ernst R. Berndt & Bronwyn H. Hall & Robert E. Hall & Jerry A. Hausman, 1974. "Estimation and Inference in Nonlinear Structural Models," NBER Chapters,in: Annals of Economic and Social Measurement, Volume 3, number 4, pages 653-665 National Bureau of Economic Research, Inc.
    3. Lewis C. Solomon, 1975. "The Definition of College Quality and Its Impact on Earnings," NBER Chapters,in: Explorations in Economic Research, Volume 2, number 4, pages 537-587 National Bureau of Economic Research, Inc.
    4. Jeffrey R. Kling & Jens Ludwig & Lawrence F. Katz, 2004. "Youth Criminal Behavior in the Moving to Opportunity Experiment," Working Papers 6, Princeton University, Department of Economics, Industrial Relations Section..
    5. Steven F. Venti & David A. Wise, 1981. "Test Scores and Self-Selection of Higher Education: College Attendance versus College Completion," NBER Working Papers 0709, National Bureau of Economic Research, Inc.
    6. Duncan, Gregory M, 1980. "Formulation and Statistical Analysis of the Mixed, Continuous/Discrete Dependent Variable Model in Classical Production Theory," Econometrica, Econometric Society, vol. 48(4), pages 839-852, May.
    7. repec:pri:indrel:dsp01sj1391935 is not listed on IDEAS
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