Effects of Higher Minimum Wages on Teen Employment and School Enrollment

Both Congress and the Senate recently passed legislation increasing the federal minimum wage from $5.15 to $6.15 per hour. Proposals to increase the federal minimum wage have lately received popular support from the public and politicians from "both sides of the aisle." Nonetheless, the research community continues to question the efficacy of increasing minimum wages, at both the state and federal levels. This study analyzes the effect of higher minimum wages on teen employment and school enrollment using a large, nationally representative longitudinal dataset, the Survey of Income and Program Participation. We show how recent minimum wage hikes affect teenagers in general and key demographic subgroups among the teenage population. Opponents of the minimum wage hike contend that minimum wage increases reduce employment and prompt some teens to drop out of school. Moreover, opponents maintain that a higher minimum wage has a more negative impact on younger teens, blacks and Hispanics compared to older teens, and nonblack and non-Hispanic teens. Proponents of the minimum wage hike argue that the job-loss effect to be either small or nonexistent. This research, summarized in Bernstein and Schmitt (1998), suggests that the benefits of minimum wage increases to low-wage workers and their families far outweigh the costs. Our results initially appear to suggest that the proposed minimum wage hike would significantly increase teen employment and would slightly reduce school enrollment. In addition, we find that the proposed minimum wage hike would decrease the probability of becoming idle, i.e., not-enrolled and not-employed, among the entire teenage population. However, consistent with Neumark and Wascher's 1995 study, our findings indicate that black and Hispanic teens and teens in central cities are more likely to become idle as a result of the proposed minimum wage increase.