Working Paper: NBER ID: w3710
Authors: David Card
Abstract: In July 1988 California's minimum wage rose from $3.35 to $4.25. In the previous year, 11 percent of California workers and fully one-half of its teenage workers earned less than the new state minimum. The state-specific nature of the California increase provides a valuable opportunity to study the effects of minimum wage legislation. As in a conventional non-experimental program evaluation, labor market trends in other states can be used to infer what would have happened in California in the absence of the law. Drawing on published labor market statistics and microdata samples from the Current Population Survey, I apply this strategy to estimate the effects of the rise in the minimum wage on various groups and industries in the state. Special attention is paid to teenage workers and employees in retail trade. The results are striking. The increase in the minimum raised wages of teenagers and other low wage workers by 5-10 percent. Contrary to conventional predictions, however, the employment rate of teenage workers rose, while their school enrollment rate fell.
Keywords: Minimum Wage; Employment; Labor Market; California
JEL Codes: J38; J23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Minimum wage increase (J38) | Wages for teenagers and low-wage workers (J31) |
| Minimum wage increase (J38) | Employment rate of teenage workers (J63) |
| Minimum wage increase (J38) | School enrollment rates among teenagers (I21) |
| Wages for teenagers and low-wage workers (J31) | Employment rate of teenage workers (J63) |