STUDY: Do Minimum Wages Really Reduce Teen Employment?

Do Minimum Wages Really Reduce Teen Employment?

Accounting for Heterogeneity and Selectivity in State Panel Data

SYLVIA A. ALLEGRETTO, ARINDRAJIT DUBE, and
MICHAEL REICH

Traditional estimates that often find minimum wage disemployment effects include controls for state unemployment rates and state-and year-fixed effects. Using CPS data on teens for the period 1990–2009, we show that such estimates fail to account for heterogeneous employment patterns that are correlated with selectivity among states with minimum wages. As a result, the estimates are often biased and not robust to the source of identifying variation. Including controls for long-term growth differences among states and for heterogeneous economic shocks renders the employment and hours elasticities indistinguishable from zero and rules out any but very small disemployment effects. Dynamic evidence further shows the nature of bias in traditional estimates, and it also rules out all but very small negative long-run effects. In addition, we do not find evidence that employment effects vary in different
parts of the business cycle. We also consider predictable versus unpredictable changes in the minimum wage by looking at the effects of state indexation of the minimum wage.

 http://www.irle.berkeley.edu/workingpapers/166-08.pdf

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s