Minimum Wages, Employment, and College Enrollment

2018 ◽  
Vol 64 (1) ◽  
pp. 3-18
Author(s):  
Lance Wescher ◽  
Travis Hutchinson ◽  
Anna Rannou
Keyword(s):  
Minimum Wage ◽  
College Enrollment ◽  
Probit Model ◽  
The United States ◽  
Jel Classification ◽  
Minimum Wages ◽  
Multinomial Probit ◽  
Minimum Wage Increase ◽  
Transition Path ◽  
Multinomial Probit Model

Most studies of the effects of minimum wage laws look exclusively at the labor market. This article investigates the less-researched topic of the effects of a minimum wage increase on enrollment in undergraduate higher education institutions in the United States. With a higher opportunity cost of pursuing an education given a higher minimum wage, potential students may opt to work instead of attend college. Conversely, if an increase in the minimum wage raises the unemployment rate for young workers, more people may enroll in college, as they are unable to find employment. Using restricted geocode variables and panel data from National Longitudinal Survey of Youth (NLSY97) over a period of time in which every state saw an increase in its effective minimum wage, we find that higher minimum wages do correspond to lower levels of college enrollment. We use a multinomial probit model to examine how tradeoffs are made between employment and college enrollment. Finally, we examine the transition path between college enrollment and employment. JEL Classification: I23, J24, and E24.

scholarly journals The Econometrics and Economics of the Employment Effects of Minimum Wages: Getting from Known Unknowns to Known Knowns

2019 ◽  
Vol 20 (3) ◽  
pp. 293-329 ◽  
Author(s):  
David Neumark
Keyword(s):  
United States ◽  
Minimum Wage ◽  
Past Research ◽  
The United States ◽  
Minimum Wages ◽  
Definitive Answer ◽  
Employment Effects ◽  
Conflicting Evidence ◽  
Known Unknowns ◽  
Wage Increases

Abstract I discuss the econometrics and the economics of past research on the effects of minimum wages on employment in the United States. My intent is to try to identify key questions raised in the recent literature, and some from the earlier literature, which I think hold the most promise for understanding the conflicting evidence and arriving at a more definitive answer about the employment effects of minimum wages. My secondary goal is to discuss how we can narrow the range of uncertainty about the likely effects of the large minimum wage increases becoming more prevalent in the United States. I discuss some insights from both theory and past evidence that may be informative about the effects of high minimum wages, and try to emphasize what research can be done now and in the near future to provide useful evidence to policymakers on the results of the coming high minimum wage experiment, whether in the United States or in other countries.

scholarly journals The Effect of Minimum Wages on Low-Wage Jobs*

2019 ◽  
Vol 134 (3) ◽  
pp. 1405-1454 ◽  
Author(s):  
Doruk Cengiz ◽  
Arindrajit Dube ◽  
Attila Lindner ◽  
Ben Zipperer
Keyword(s):  
Minimum Wage ◽  
State Level ◽  
The United States ◽  
Minimum Wages ◽  
Wage Distribution ◽  
Employment Effect ◽  
Hourly Wage ◽  
Difference In Differences ◽  
Bottom Part ◽  
Demographic Groups

Abstract We estimate the effect of minimum wages on low-wage jobs using 138 prominent state-level minimum wage changes between 1979 and 2016 in the United States using a difference-in-differences approach. We first estimate the effect of the minimum wage increase on employment changes by wage bins throughout the hourly wage distribution. We then focus on the bottom part of the wage distribution and compare the number of excess jobs paying at or slightly above the new minimum wage to the missing jobs paying below it to infer the employment effect. We find that the overall number of low-wage jobs remained essentially unchanged over the five years following the increase. At the same time, the direct effect of the minimum wage on average earnings was amplified by modest wage spillovers at the bottom of the wage distribution. Our estimates by detailed demographic groups show that the lack of job loss is not explained by labor-labor substitution at the bottom of the wage distribution. We also find no evidence of disemployment when we consider higher levels of minimum wages. However, we do find some evidence of reduced employment in tradeable sectors. We also show how decomposing the overall employment effect by wage bins allows a transparent way of assessing the plausibility of estimates.

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