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

51 Pages Posted: 22 Jun 2000 Last revised: 2 Jun 2021

See all articles by David Neumark

David Neumark

University of California, Irvine - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

William Wascher

Board of Governors of the Federal Reserve System

Date Written: April 1995

Abstract

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.

Suggested Citation

Neumark, David and Wascher, William, The Effects of Minimum Wages on Teenage Employment and Enrollment: Evidence from Matched CPS Surveys (April 1995). NBER Working Paper No. w5092, Available at SSRN: https://ssrn.com/abstract=225870

David Neumark (Contact Author)

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William Wascher

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