The public policy blog of the American Enterprise Institute

Subscribe to the blog

Discussion: (63 comments)

  1. Agree generally with your overall point, of course. Artificially raising the wage for underskilled workers reduces employment — but what about in the case of a monopsonistic labor market? As is the case when government is a monopsonistic buyer of goods (defense for instance, or medicine in EU) the price (of labor in this case) is below the market equilibrium.

    Would be great to hear your thoughts.

    1. Jon Murphy

      I cannot speak for Dr. Perry, but if I may add my two cents here:

      I find the monosopy argument pretty weak. There are very few markets where there is only one buyer of labor, and minimum-skill labor at that. There may be a few minor geographical markets that fit this description and may benefit from a minimum wage, but on a national scale? Nah.

      1. morganovich

        1. i love the word monopsony.

        2. i agree with jon that there are very few monopsonistic labor markets and even if there are, one can always move. workers are not serfs tied to the land.

        3. monopsonistic purchase of military goods certainly does not seem to be keeping prices low.

        4. medical monopsony, as in canada results in chronic under-supply of care and long waits to get it. i think that proves the point on the price fixing issue. if you fix prices too low (healthcare) you get less of it and rationing by wait-list. if you price it too high, like a high minimum wage or a closed shop union contract, then you get too little demand for labor and substitution of capital for labor.

        1. 1) it’s a great one isn’t it

          2) I agree in theory; but in general labor isn’t very mobile — at least not in the short-term. but you’re definitely right in that the burden of proving monopsony should be on those calling for min wages.

          3) do we know that for sure? I imagine that civilian M16’s for instance are probably much more expensive than the ones purchased by the military — if nothing else than just due to volume. I imagine that basic security for private sector is also more expensive than security in government or for the military. this isn’t to say that this is problematic though.

          4)this is the best point, I think. it’s extremely hard to know what the market-clearing price of labor (or any good) should be. that’s why I really like Mark’s other post on the socratic approach to the min wage — why $9 and not $20? $200? $2000?

          1. morganovich

            2. what is your evidence for that? a greater % of americans move every year than are unemployed.


            this seems like a great deal of mobility, certainly enough for most to find work.

            3. seriously? i have had investments in numerous companies that sold to the military. they usually sell at a HUGE premium to private buyers. selling laptops, com gear, and ruggedized tablets etc to the military is a VERY high margin business, almost always the highest margin segment such companies have.

            also keep in mind that the military tends to pay the full development costs of a weapon or system. delta does not pay boeing to develop the 787. the military DOES pay to develop the f35 and he f22. this is the flip side of monopsony. if i can only sell to you, i will develop nothing until you pay me to.

            look at the amount NASA spent on the shuttle vs what guys like virgin and rutan/allen spent. the issue is that government agencies are not responsible for p/l and actually suffer if they save money. come in under budget and your budget gets cut. doing more with less is active penalized, not rewarded.

            monopsony is actually a rotten position to buy products from.

            4. the beauty of markets is that you do not need to know what the market clearing price is. it emerges all by itself. short term dislocation is possible (natural disaster, cabbage patch kid, etc) but it rapidly adapts. the only time you see long term dislocations (like canada’s wait lists) is when markets are disrupted by law.

            let Canadian docs set price and have patients pay it, wait lists would be gone in weeks. prices would soar. then, attracted by the high prices, more doctors would train or move to canada and existing docs would invest heavily in time/labor saving equipment and practices that made no sense at low prices.

            you are absolutely correct that to sit outside a market and try to set a Marketa clearing price is all but impossible, but the good news is no one has to.

  2. Mark, I wonder how many people who oppose your school of thought on this will suggest that teenage unemployment in at least the last decade seems to be double the national unemployment rate so is it really about the minimum wage law? Incidentally, I feel this law is unconstitutional, corrosive and discriminates disproportionately against the unskilled and lesser-educated classes but I wonder how we balance our argument against the suggestion that youth unemployment is essentially double that off all-ages.

  3. Jon Murphy

    It is too bad the unemployment rate for teenagers only goes back to about 2002. I’m hesitant to draw any conclusions from this given the massive recession that was 2007-2009. Without more data, I think one could make an argument that the rising unemployment rate is due to the natural cycle of the economy rather then the minimum wage.

    That said, I do think this relationship bears watching over time. As we move through this decade and get more data, I think we can watch to see if the teenage unemployment rate settles toward its pre-recession level, or if it moves to a higher rate.

    1. I have teenage unemployment data from 1948-2010. I used it a couple years ago in college to run a VAR model involving the real minimum wage, teen employment-to-population, and 65+ employment-to-population ratios.

      SPOILER ALERT: 65+ ratio had a significant (negative) effect on the teen ratio but the minimum wage did not.

      I would not trust my results :)

      1. Jon Murphy

        Wow, where’d you find data that far back?

        1. Jon Murphy

          Never mind, found it

      2. It seems like it would only matter if the minimum wage was close to the market wage.

  4. A related observation (made by John Allison/Cato) – He mentions how because of the deliberate attempt by the Feds (during the Clinton Presidency – the objective of making homeownership for everyone affordable) – the wages of construction workers went up – it caused the wages of everyone else to go up – and many in the non housing/construction industry decided that it is best to move such jobs overseas – the housing market collapsed – but the overseas workers were not trained that they can compete even at the prevailing wages – and thus in the name of “doing good” (housing) – the Feds caused wages to rise – more jobs were lost everywhere – and we are still struggling …

    To the political class, data like the one shown here is irrelevant – many people who cannot find jobs because their skills are not worth the $9 will nevertheless appear grateful that “my congressman decided to raise the minimum wage out of compassion and care” – Walter Williams has written about his own experience and how he found jobs growing up and learning from such jobs – today’s political class is determined to make sure that those that do not have skills will remain that way – and not have opportunities to grow through learning on the job

    1. Jon Murphy

      To the political class, data like the one shown here is irrelevant

      I think you hit on a very important point, Krishnan. You can eliminate “the political class” from your statement, as I’d say a good number of people don’t understand the connections. When I discuss world events, this seems to be the biggest issue. People don’t see how a growing Chinese Middle Class could affect oil prices. Or how an embargo with Iran hurts American consumers. I think that is a failure of the economists to explain ourselves. Milton Freidman was great at it. Don Beaudreaux and Russ Roberts are very good. Dr. Perry here is very good. but most of us economists just do our oracle thing and say “ooooOOOOOooooo minimum wage goes up? So does unskilled unemployment! Trust me on this!”

  5. Citizen B.

    2012 was an unusual year for the U.S. because producitivity fell.

    Now that the minimum wage will probably be raised in 2013, along with immediate tax benefits from capital spending, productivity gains are much incentivized for the year.

    1. Huh? How does a minimum wage incentivize productivity gains?

      1. Citizen B.

        Y thanks for asking how the increase in min. wage will incentivize productivity gains.

        Def. of producitvity from “The amount of output per unit of input (labor, equipment, and capital).”

        If the cost of labor goes up, then increased capital spending in labor decreasing capital investments such as robots is incentivized. Menial, minimum wage, jobs are easily replaced with robotic software and mechanical devices. Thus, output is increased and labor input decreased thanks to the push for higher labor costs.

        1. I can see how arbitrarily marginally higher labor costs might encourage higher productivity to some extent if it is defined as output per unit of labor input – push into the frontier before they are “ready”. If input is defined so broadly as to include capital and such, it seems more likely to be a wash or worse to me.

          I don’t use “improved productivity” as all good in this case, considering the economic and social alternative arrangements and such that people may have demonstrably preferred if not for the government intervention.

        2. morganovich

          cit b-

          i think you need to be a little careful here.

          you can increase LABOR productivity by hiking a min wage as only more productive jobs will remain and capital will get spent to automate and make remaining labor more fruitful.

          this does not mean that overall productivity rises.

          if i can replace a worker with a machine, that has a cost and affects overall productivity. if such a switch would have enhanced overall productivity, then (in theory) i would have already done it.

          if the substitution is only made preferable by labor costs rising, then i am actually losing productivity as i am spending more on capital than i would have on lower wages and you could see overall productivity drop even though labor productivity rose.

          1. the types of jobs that pay minimum wage usually cannot be automated much further although I notice that companies like Sheetz and WaWa have replaced the proverbial order-taker with a touch screen… and the guy/gal that builds your sandwich hands it to you.

            but Sheetz and WaWa … COULD hire independent contractors instead of wage employees, right?

          2. Citizen B.

            “if such a switch would have enhanced overall productivity, then (in theory) i would have already done it”

            morgan, with capital spending tax incentives for 2013, it is a very good possibility that organizations will make investments to improve producitivity with higher urgency now — because the capital chasm has shrunk and the labor cost chasm grown.

            Capital costs probably won’t go any lower then they are now and labor costs have numerous high level paramours.

          3. morganovich

            cit b-

            if by capital costs, you mean financing, then yes, but if you mean the cost of capital equipment, then i doubt it.

            increased demand for capital equipment (robots, automation, etc) drives up the price for such and if, as you say, financing costs will not go lower, there is nothing to offset that.

            i’m not saying that overall productivity has to drop.

            what i am saying is that hiking minimum wages doe not guarantee a rise in overall productivity and is far more likely to actually cause it to fall as an artificially high wage price drives capital equipment substitution that was not a source of more productivity before.

        3. Faulty logic. The tradeoff to more capital-intensive production happens ONLY because the cost of labor is artificially inflated by a higher min wage.

          For a given product, Y, assume that you’re using labor and capital (L,K); thus Y= f(L,K)

          The decisions of how to allocate L and K are based on the marginal productivity of L and K and their marginal cost.
          Let’s say you want to produce 2 units of Y.

          If 1 unit of K gets you 2 units of Y and the variable cost (forget fixed costs for a second) is $1, you’ve just spent $1.

          If 1 unit of L gets you 1 unit, but costs $0.50, you’ve still spent $1 but you need 2 units of L. You’re indifferent between using the two inputs (obviously a gross simplification).

          Let’s say the cost of L goes up by 100% to $1.

          Now 1 unit of L still gets you 1 unit, but to get 2 units you need to spend $2.

          Productivity hasn’t increased but you’re no longer indifferent between the two inputs — now you’ll use only K to produce Y.

          Obviously in reality, you combine L and K, but deciding how to do so depends on their marginal productivity (how much extra output you can extract from one extra unit) and the marginal cost of that output.

          REAL output does not increase. Any increase in output would be offset by higher costs; if switching to capital could have produced higher output it would have happened before.

          1. Citizen B.

            “Faulty logic. The tradeoff to more capital-intensive production happens ONLY because the cost of labor is artificially inflated by a higher min wage.”

            Faulty logic? The theme of this post: “Let’s review the adverse effects of raising the minimum wage on teenagers…”

            “Any increase in output would be offset by higher costs; if switching to capital could have produced higher output it would have happened before.”

            Oh, capital allocation is automatic without regard to economics? No, the deployment of order taking kiosks by McDonalds has been implemented in Europe and now highly likely in the U.S. if min. wage rises.

          2. “Oh, capital allocation is automatic without regard to economics? No, the deployment of order taking kiosks by McDonalds has been implemented in Europe and now highly likely in the U.S. if min. wage rises.”

            No. Capital allocation has everything to do with economics; that’s my point. If more efficient capital allocation could have happened, all else held equal, it already would have. Nominal productivity gains versus real productivity gains — as Morgan noted earlier, you’re losing productivity overall because you’re paying more at a given level of output.

          3. morganovich



            if overall productivity could be increased by a given investment in capital equipment, it would happen without a min wage hike. the hike in wages simply reduces the frontier of production possibilities.

          4. Citizen B.

            YF and morganovich, what I am predicting, is that in 2014 we will look back and find that U.S. producitivity has increased.

            Will that be in conincidence or correlation to the increased minimum wage, and immediate write-off of capex spending? Yep, yep.

          5. @Citizen B

            Are you talking about labor productivity or multi-factor productivity? Labor productivity will increase as a result of substitution, but multi-factor productivity will likely fall because each unit of output will cost more as a result of that substitution.

            You’re missing the point that productivity simply cannot increase by legislative fiat — in the current situation, given all costs, businesses by definition are as productive as possible given a particular amount of labor and capital in the economy. If the cost of one increases relative to the other (labor relative to capital) substitution occurs to offset that cost — but that substitution was not efficient given the previous (lower cost) situation.

          6. Citizen B.

            YF, the amount of output per hour of work will increase.

          7. Citizen B,

            And the average cost of that output will increase as well; hence the distinction between nominal and real output.

            Real output is tempered by the increased cost. I’m not sure what you’re not understanding about this — I’ve explained it about as simply as I could.

  6. here’s the thing:

    ” More than 90% of all countries have some kind of minimum wage legislation.”

    Now all of these other countries have their own economic advisers and yet in more than 100 other countries the advisers apparently support minimum wage laws.

    So that leaves us with this paradox. If minimum wage laws are so clearly wrong – why do most of the world’s countries have them?

    are there any countries whose advisers agree with Mark Perry and company and thus have no minimum wage laws because they do subscribe to what these “studies” show?

    1. So because government bureaucrats have gained enormous political traction with this boondoggle across our globe it rules the measure effective? The reason so many country’s use it is because it enhances political power, not because it’s actually an effective economic policy.

      1. re: enhanced political power

        across the globe, eh?

        the assumption seems to be that no where on earth that there are good governments… right?

        that virtually all the government on earth is corrupt and ignores basic economics? that virtually all the govt on earth is being advised by bad economists?

        1. morganovich


          there is no paradox. you are once more just using an appeal to practice fallacy.

          elected governments face different incentive sets than economies as a whole.

          nearly every country imposes tariffs too. that does not make them good.

          nearly every country used to sanction slavery and deny female suffrage (or any suffrage at all). that is not a valid argument for any of those things.

          politicians like to grandstand about minimum wages and most voters are too economically illiterate to see this sort of price fixing for what it really is and does.

          it’s as simple as that. one of the great flaws with democracy is that it supposes that the demos knows what it is talking/voting about.

          clearly, that is not always a good assumption.

          1. re: “appeal to practice”

            vs .. what .. theories only and no real world examples?

            I do not believe that just because a country does something that it makes it correct but when 90% of countries do something… calling it an “appeal to practice” is just ignoring the realities in my view.

            more than that – let’s assume for the sake of argument that 90% of countries …ARE WRONG…

            then I AM interested in the 10% that are doing it “right” and how that experience compares to the 90% doing it wrong.

            but when there are NO countries doing it right – then “practice” IS the “reality”.

            One would have to presume that 150 countries – each one has a staff of economic advisers.


            so how can.. what amounts to 100’s , 1000’s of economists be all wrong and the few that are not advising government – are right?

          2. Larry,

            You’re making a different argument; one that is distinct from the economic case against a minimum wage.

            As morganovich noted above, government officials (and this includes the economic advisers) have drastically different incentives than the economy as a whole — politicians have to get reelected and maintain support. Minimum wage legislation is an easy, populist way to do so.

            No matter how you slice it, a minimum wage introduces inefficiency: CBO report on the matter ( which found that families only benefited from 10% of the cost of the minimum wage; there is a wealth of economic evidence and EMPIRICAL work that makes similar points.

            As a society, we obviously focus on more than just efficiency — we’re also concerned to some level with equity for better or worse. No country focuses only on efficiency; that’s why almost all countries have a minimum wage. But that doesn’t mean that the minimum wage is universally the best way to do so — that so many countries do so just means that it’s politically expedient.

            Also by lumping something like 100 countries’ minimum wage laws together you ignore the important differences between how they’re structured. Australia, for instance, staggers it into separate tiers; American minimum wage laws are largely non-binding because there’s no real penalty (except back wages) for not paying the min wage.

            You love to knock economic theory but you don’t take the time to explore the empirical evidence supporting it (which is what Mark presented above).

          3. @yp

            re: ” But that doesn’t mean that the minimum wage is universally the best way to do so — that so many countries do so just means that it’s politically expedient.”

            the fact that it universally gets treated pretty much the same way though….

            “Also by lumping something like 100 countries’ minimum wage laws together you ignore the important differences between how they’re structured. Australia, for instance, staggers it into separate tiers; American minimum wage laws are largely non-binding because there’s no real penalty (except back wages) for not paying the min wage.”

            I agree there ARE differences between how countries implement it but few if any deal with it purely from an economic/efficiency perspective – and perhaps there are better, more efficient ways to implement it but when you see discussions of it here – the “con” argument is always a “any/all versions of minimum wage are bad and should be totally done away with” – as opposed to perhaps pointing out “better” middle-ground approaches to it.

            when you make the initial argument an all or nothing argument – it invites all or nothing rebuttals.

            “You love to knock economic theory but you don’t take the time to explore the empirical evidence supporting it (which is what Mark presented above).”

            no.. I ACCEPT the empirical evidence.. I just think it’s theoretical with no chance of pure implementation and as I said before – there is a “here’s a better way, middle ground argument” – just an ideological opposition of the concept itself.

            that does not really advance the dialogue.. it basically writes off the entire world as dead wrong no matter how they might implement differently – if they have minimum wage law – it’s wrong and should be discarded.

            I’d actually LIKE to see a more in-depth discussion of various “better” ways.

            Finally, as I have also pointed out – there are exemptions for young people as well as options to not use wage employees.

            it’s not like the govt forces you to only hire full up minimum wage workers or nothing else at all.

          4. morganovich


            appeal to practice is a form of logical fallacy. i have no idea how many times it will take for you to finally see this.

            “every great nation has a king. this democracy/republic/individual rights thing will never work. why do we all have kings if a republic is such a good idea?”

            -larry circa 1200


            read an re read this until you understand it. 90% of the arguments you make are based in this fallacy.

            “lots of people do it so it must be good” is simply not a valid argument.

            even if 100% of people do somehting, this doe not prove it to be right, merely common.

            as this is the 50th time i have tried to explain this to you, i doubt you will grasp it this time either, but hope springs eternal.

            the rest of your argument is even more flawed.
            let’s flip it on it’s head:

            despite having economic advisers, most politicians still chose to chase narrow political gain and populist pandering by taking advantage of the economic illiteracy of voters.

            the economists do not need to be wrong. all that need happen is that politicians be self interested and constituents economically ignorant. neither of those presumptions seem like any sort of stretch to me.

          5. re: appeal to practice..

            I well understand the concept and I even agree with it for instance, the decades/centuries we spent finding slavery acceptable – then not.

            All change does start at some point and then spreads – I agree with that also.

            I even accept counter examples of exceptions to the overall practices and this is why I often for a list of the counter examples when commenting that a practice seems widespread.

            but on the other hand – to insist that every country on the planet is wrong and that “some day” the theory will take hold and change will occur is a bridge too far for me.

            I assume at the point that there are no counter examples and it’s been that way for a while that other factors must also be present that “mess up” the ability of the theory to become practice.

            I don’t even say it could never happen – but I do think in dealing with the here and now – advocating that the theory is right and the practice is wrong – and virtually every country on the planet is said to be wrong…

            well… I’m not sure stating that simple fact is just an appeal to practice.. if nothing else, it’s pointing out the realities also.

        2. morganovich


          that’s a flawed argument.

          it’s not about wrong, it’s about “captured by political interests”.

          pretty much every country in the world has tariffs too, which are PROVABLY bad for the imposing country. this is because they are not run with maximizing economic benefit as their top goal.

          you re making a whole raft of bad assumptive jumps here, particularly the assumptions that voters understand economics and that politicians will chose to maximize economic well being for the nation as opposed to populist pandering and political gain/cronyism.

          and btw, there ARE examples of nations with no minimum wage.

          germany has no national minimum wage. neither does singapore. honk kong did not. austria does not.

          so this notion of yours that no major developed nation lacks minimum wage laws is just flat out false. did you even try checking this before making such a claim? 30 seconds with google would have shown you this. did you just assume it to be true because it suited your preconceptions?

          1. re: ” “captured by political interests”.

            all countries are and this is bad, right?

            re: not all countries have minimum wage

            true. but check into what they do instead. It’s STILL government involved in wages…

            In Germany they have national trade unions – something I’m sure you would believe even worse than minimum wage, right?

            Hong Kong did this: ” The Legislative Council voted to introduce a minimum wage in Hong Kong in July 2010.[1]”

            Singapore has no minimum wage but allows collective bargaining…

            but my point is that many, many countries have some form of minimum wage and/or govt involvement of wage policy to include support of trade unions and collective bargaining.

            you say this is bad policy.

            I say the majority of the world does it.

            I also say if it is bad policy – since there are countries like Singapore without out – a more convincing “study” would be to compare countries with it vs countries without it as opposed to some of the cockamamie stuff that AEI cooks up that has obvious holes in it and in general is suspect because of AEIs basic agenda when it comes to the concept of minimum wage.

            I would not be surprised to see ANY organization that is opposed to something – to produce a study that “proves” it.. and AEI is one of the more frequent producers of such “studies”.

  7. People can lie and commit errors. Just because they conform doesn’t make it the truth. It seems to me that politicians, those around them and those who enforce for them don’t face much of a cost if they are wrong on this, and the same goes for voters. Indeed, it seems to me that their pursuit of such offices may mean they place a low value on truth in economic theory since it may endanger their power, which means not only the cost of such errors low, but the effort to correct is high, and their personal benefit to just conforming is high.

  8. PeakTrader

    Some people ignore significant factors, including recessions and depressions. When the real minimum wage was above $8 an hour, roughly between 1960 and 1980, the teen labor force participation rate rose from below 60% to above 70%, and when the real minimum wage was at its highest level, in 1968, the unemployment rate for the country was 3.5%.

    1. morganovich

      peak has a point here about correlation and causality.

      it would be interesting to look at this chart with adult unemployment superimposed and to then chart the difference between teen and adult unemployment.

      charting this as the variance of that spread (teen – adult) would help remove the overall economic picture from the analysis and perhaps give us a clearer picture of the impact on teens.

      alternately we could look at the minimum wage job count and compare it to the overall job count (assuming such data is available) and likely get an even clearer picture of the effect of a min wage hike on min wage workers that is already adjusted for economic performance and overall job creation.

      1. Goldmine here:

        Raising the minimum wage would affect at most 1.6 million people. The rest of the 3.8 million making min wage or less, make less. Also, 491k of these are teens between 16 and 19.

        Those that make less would probably be unaffected w/o changing the way min wage is enforced.

        This is also a bit of a simplification since obviously someone earning $8/hr would be affected by an increase to $9/hr — that’s a bit more difficult to find data on, however.

  9. Let’s review the adverse effects of raising the minimum wage on teenagers when it increased 19% between 1994 and 1995.

    The chart is 1989 to 1997. Different narrative.

    1. Citizen B.

      marmico,Mark Perry’s graph above minused out the “overall rate” but your FRED Graph did not.

      If you want to try and compare then you need to take out the overall unemployment rate from the 16-19 year old rate — and then graph to see if you have a “different narrative”.

  10. then graph to see if you have a “different narrative”.

    I need do nothing of the sort. The 1994 minimum wage increase did not raise the unemployment rate differential expressed as a percent between the teen rate and the overall rate; it is specifically omitted from the chart because it does not support the narrative. That is my “litmus test” of rational thinking.

    FWIW, the teen unemployment rate to the overall unemployment rate ratio is roughly 3:1 across all times in the last 25 years.

    1. The economist had a piece that raised the issue that when the minimum wage was imposed in the UK it did not affect unemployment, (The UK wage is 6.19 pounds per hour or about 9.90 an hour) Here is a link to a wikipedia article on minimum wage that says the same thing about the UK
      Now the article also says that in the US in 1938 the level was set high enough to destroy southern inefficient factories. So it can clearly cut both ways. Also to add some facts here is a link to a list of minimum wages per country:

  11. Gee. A chart of youth unemployment shows a sharp increase in 2008. Wonder if there might have been any other factors.

    1. re: ” Wonder if there might have been any other factors”

      and you expect AEI “scholars” to include that in their discussion?

      BLASPHEMY! it would totally ruin a perfectly good anti-Obama “socialist” rant …!!!!

      1. “and you expect AEI “scholars” to include that in their discussion?”

        We certainly wouldn’t expect your ignorant old ass to add anything to it.

        1. ” “and you expect AEI “scholars” to include that in their discussion?”

          We certainly wouldn’t expect your ignorant old ass to add anything to it.”

          well thank GAWD I’m not an AEI “scholar” making up propaganda for a living… ;-)

  12. A chart of youth unemployment shows a sharp increase in 2008. Wonder if there might have been any other factors

    Precisely, if you mean factors other than an increase in the minimum wage.

    In the 1974-1981 and 1996-97 minimum wage increase episodes, the alleged “excess teen unemployment” is nonexistent. A case can be made for a rise in it during the 1990-91 episode. The 1990 and 2007 increases in the min wage were coincident with recessions.

    See Teen Excess Unemployment since 1970.

    Perry’s alleged proof of adverse effects of a rise in the minimum wage is nothing of the sort.

  13. Walter Wessels

    Most labor economists do not use the unemployment rate to measure the impact of the minimum wage. An increase in the minimum wage decreases the employment rate. The unemployment rate, or jobless rate, measures the number of persons actively looking for a job. One can lose a job, leave the labor force, and never become “unemployed” as measured by the BLS. As Jacob Mincer showed long ago, an increase in the minimum wage could increase the unemployment rate by increasing the value of looking for work, pulling more people into the labor force. Alternatively, an increase in the minimum wage could decrease unemployment by making fewer jobs available. Thus, an increase in unemployment could (but need not) imply that all workers are better off (the value of looking for job going up) and a decrease could (but need not) imply those losing jobs or looking for work are worse off. To put it another way, the unemployment or jobless rate tells us nothing, without added information, as to how workers are affected.

  14. Wayne Fitzgibbon, Ph.D.

    This correlation is meaningless. Without placement on the context of other macroeconomic factors no conclusion can be drawn.

  15. Gloria McCoy

    It’s amazing we are more concerned about teenagers who are not the working poor, they’re living at home. The working poor need the increase in minimum wage. Unless your thinking about those teen parents then I would agree to talk about teens; however, I’m concerned our country lacks compassion for others. This is why we debate everything with selfishness and self imposed denial of opportunity for anyone. Way to keep the poor poor. That’s big business .

  16. Walt Greenway

    The minimum wage law has been around since 1938 and will be around long after I am gone, so I am not taking a position on it one way or another. We will have to deal with it until a Libertarian is elected, and that will never happen with our two-party system.

    Purely from a research viewpoint, for a stronger case that the teenage unemployment rate and an increase in the minimum wage are correlated and not a current phenomenon or inflation related, I think the data and corresponding chart should be measured in real dollars and go back another 30 years. If the claim is true, it should stand the test of time and the purchasing power of money.

  17. Hi,
    I have no data, but a long memory from a small town.
    At the low teens, 1938-40, I and all of my friends found some sort of odd jobs. My first job that I can remember was mowing a lawn for $.35. In 1944 I happily took a job at $.5o an hour digging ditch. By1949 I was making $1.00 an hour in a sommer job in a canning factory, $.10 more than the going wage. All of my friends found some type of work.
    Now lower teens can not find anysort of work. Most older teens are in the same boat. Partial reason, the minimum wage.

    1. the Fair Labor act went into law in the 1930’s right?

      I delivered papers, worked as a floor sweeper/re-stocker in a grocery store, worked in a floor shop, at Leggetts as a shoe salesman.. at K-mart as a toy “manager”, then at a service station … etc… finally got to college and settled into better situation but I do not recall much except I did get W2s…. and I remember at least in a couple places in the employees room – the wage law poster.

      In 2006, changes were made to the law with some controversy for low-level supervisors who were re-classified as “exempt” management so they could work more than 40 hours and not get overtime.

      it could be that the minimum wage law is an artifact that no longer fits in a modern world… but I still wonder if we would, at the same time, abandon policies that would supply entitlements to low paid workers to make them whole at the poverty threshold level.

      It was Ronald Reagan by the way that said this about the Earned Income Credit: “the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress.”

      was he wrong?

  18. Can someone tell me if union wages are indexed to the minimum, would explain a lot….

  19. In the 1930’s we tended to ignore minimum wage laws for casual labor. Still do to a small extent.

    We need to allow for the young to learn how. I just switched from a young relative learning to do housework to a mature professional. Twice the hourly wage, cheaper on the basis of accomplishments. The young need a chance to learn how and a minimum wage restricts their opportunities to do so.

  20. This is BULL. Your taking numbers from one time peried which happened to be during the beginning of a major recession. These numbers are sewed. If your going to make a chart at least include 3 separate time periods to prove your point. There is nothing to look at to find consistency. This is a theory based on one situation and compartmentalized from other MAJOR factors.

  21. as a 20-year old college student, I find myself fortunate to have a less menial job at $10/hr, however, I haven’t been working for long.
    I still remember hunting for jobs within 10 miles, in the suburbs of Minneapolis.
    there is not much out there, when you have no previous job experience. I see most of the people working at mcdonalds and such places are actually in their late 30’s, or early 40’s.
    I see many people here who appear to be older, and have at least bacelors, and I even see a couple doctorates up there. what do you people know about the job market for inexperienced teenagers?
    i mean, sure, there are statistics, but stats can only tell you so much, and they can be skewed pretty easily.

Comments are closed.

Sort By:

Refine Content:


Additional Keywords:

Refine Results

or to save searches.

Refine Content