Teen Employment Dropped 12.4 Percent as a Direct Result of Federal Minimum Wage Hikes

As National Debate Continues on the Minimum Wage, EPI Points to the Unintended Consequences of Past Increases
  • Publication Date: October 2010

  • Topics: Minimum Wage

WASHINGTON – With an ongoing national debate about the merit of the minimum wage, the Employment Policies Institute (EPI) points to recent research estimating the teen employment loss caused by the federal minimum wage increase between July 2007 and July 2009.

Economists William E. Even of Miami University and David A. Macpherson of Trinity University found that employment for teens aged 16 to 19 without a high school diploma declined by 12.4 percent in states affected by all three stages of the federal wage hike. For all 16-to-19-year-olds in the affected states, employment fell by 6.9 percent. The authors controlled for the effects of the recession and state economic conditions, among other variables.

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.

“This research adds to an economic consensus that raising the minimum wage is disastrous for our nation’s teens,” said Michael Saltsman, research fellow at the Employment Policies Institute.

“Policymakers are right to express reservations about the value of wage hikes that price the least-experienced employees out of a job.”

Previous research also suggests that there are better ways to reduce poverty than raising the minimum wage. For instance, economists John Bishop, John Formby, and Hoseong Kim found that an expansion of the Earned Income Tax Credit would have lifted 2.5 times more people out of poverty than the increase in the federal minimum wage that took place from July 2007 to July 2009—without the unintended job loss.

Saltsman concluded: “With teen unemployment still over 25 percent nationally, the time is right for a debate on the minimum wage and the unintended consequences it has had on the entry-level and teen work force.”