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The Effects of Minimum Wages on Teenage Employment and Enrollment: Evidence from Matched CPS Surveys

  • David Neumark
  • William Wascher

The recent debate over minimum wages raises two questions. First, should policy makers no longer believe that minimum wages entail negative consequences for teenagers? Second, should economists discard the competitive labor market model? Our evidence for teenagers, using matched CPS surveys, suggests that the answer to both of these questions is no. We find that although increases in minimum wages have small net effects on overall teen employment rates, such increases raise the probability that more-skilled teenagers leave school and displace lower-skilled workers from their jobs. These findings are consistent with the predictions of a competitive labor market model that recognizes skill differences among workers. In addition, we find that the displaced lower-skilled workers are more likely to end up non-enrolled and non-employed. Thus, despite the small net disemployment effects for teenagers as a group, there are significant enrollment and employment shifts associated with minimum wage changes that should be of concern to policy makers.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5092.

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Date of creation: Apr 1995
Date of revision:
Publication status: published as With Rosella Gardecki, published as "Order from Chaos? The Effects of Early Labor Market Experiences on Adult Labor Market Outcomes", Industrial and Labor Relations Review, Vol. 51, no. 2 (January 1998): 299-322.
Handle: RePEc:nbr:nberwo:5092
Note: LS
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  8. Kim B. Clark & Lawrence H. Summers, 1982. "The Dynamics of Youth Unemployment," NBER Chapters, in: The Youth Labor Market Problem: Its Nature, Causes, and Consequences, pages 199-234 National Bureau of Economic Research, Inc.
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  16. David Neumark & William Wascher, 1994. "Minimum Wage Effects and Low-Wage Labor Markets: A Disequilibrium Approach," NBER Working Papers 4617, National Bureau of Economic Research, Inc.
  17. Finis Welch, 1993. "Matching the Current Population Surveys," Stata Technical Bulletin, StataCorp LP, vol. 2(12).
  18. Lawrence F. Katz & Alan B. Krueger, 1992. "The effect of the minimum wage on the fast-food industry," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 46(1), pages 6-21, October.
  19. Alan Krueger, 1994. "The Effect of the Minimum Wage When It Really Bites: A Reexamination of the Evidence from Puerto Rico," Working Papers 709, Princeton University, Department of Economics, Industrial Relations Section..
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