Working Paper: NBER ID: w0849
Authors: Robert H. Meyer; David A. Wise
Abstract: The employment and earnings effects of the minimum wage are estimated by parameterizing an hypothesized relationship between underlying market employment and wage relationships versus observed wage and employment distributions in the presence of a legislated minimum. If there had been no minimum during the 1973-78 period, we estimate that employment among out- of-school men 16 to 24 would have been approximately 4 percent higher than it in fact was. Among young men 16 to 19 employment would have been about 7 percent higher and among those 20 to 24, 2 percent higher. Employment among black youth 16 to 24 would have been almost 6 percent higher than it was, as compared with somewhat less than 4 percent for white youth. Although it is sometimes argued that the adverse employment effects of the minimum are offset by increased earnings, we find virtually no earnings effect. Had the minimum not been raised over the 1973-78 period, inflation would have greatly moderated the adverse employment effects of the minimum, with approximately two-thirds of the potential employment gains from elimination of the minimum attained. The weight of our evidence is inconsistent with a general increase in youth wage rates with increases in the real minimum. Our findings support the hypothesis that the effects of the minimum are concentrated on youth with sub-minimum market wage rates.
Keywords: Minimum Wage; Youth Employment; Earnings Effects
JEL Codes: J23; J38
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Minimum wage (J38) | Employment among out-of-school men aged 16 to 24 (J68) |
| Minimum wage (J38) | Employment among young men aged 16 to 19 (J63) |
| Minimum wage (J38) | Employment among young men aged 20 to 24 (J69) |
| Minimum wage (J38) | Employment among black youth aged 16 to 24 (J68) |
| Minimum wage (J38) | Employment among white youth (J79) |
| Minimum wage increase (J38) | Earnings effect (J31) |
| Minimum wage elimination (J38) | Potential employment gains (J68) |
| Minimum wage (J38) | Youth wage distribution (J31) |