New Study Shows Teen Employment Dropped 7.9 Percent in Indiana as a Direct Result of Minimum Wage Hikes
At One Year Anniversary of Wage Increase, Indiana Teens are Feeling the Burden of Job Loss
Publication Date: July 2010
Topics: Minimum Wage
WASHINGTON – Today, the Employment Policies Institute (EPI) released a new study by economists William E. Even of Miami University and David A. Macpherson of Trinity University that provides the first comprehensive estimate of teen employment loss directly caused by the recent increases in the federal minimum wage. This study carefully separates out the effects of the recession and differences in state economic conditions.
By quantifying Indiana’s teen employment loss caused by the 40 percent increase in the federal minimum wage that took place between July 2007 and July 2009, the study finds the $2.10 increase was responsible for a 7.9 percent decline in the number of employed 16- to 19-year-old Indianians. The decline is even worse for those teens with less than 12 years of education, who suffered a 11.5 percent drop in employment.
In the 32 states impacted by at least one stage of the wage increase, the study shows there were 114,400 fewer teens employed.
A policy brief summarizing the study’s key findings is available here.
“Despite the popularity of wage increases, there are many unintended consequences,” said Michael Saltsman, research fellow at EPI. “This study shows that the 40 percent federal wage hike came at a high cost to our nation’s teens, Indianians in particular.”
Saltsman added: “These estimates are conservative. As employers continue to react to the higher wage with increased use of self-service and automation – like bagging your own groceries – the job loss may be even worse.”
This study by Even and Macpherson adds to the broad consensus among economists that a higher minimum wage translates to fewer jobs for the country’s youngest workers. One recent survey of labor economists, by the University of New Hampshire, found nearly three-quarters in agreement that a higher mandated wage reduces opportunities for entry-level workers.
“Research shows that teens without job opportunities are at a higher risk of dropping out of high school, or winding up in the criminal justice system,” Saltsman concluded. “If Congress wants to do our nations’ young adults a favor this summer, they could start by lowering the mandated wage they increased last year.”