Ruhr Economic Papers

Ruhr Economic Papers #829

It Is Real: On the Relation Between Minimum Wages and Labor Market Outcomes for Teenagers

by Martin Micheli

RWI, 12/2019, 26 S./p., 8 Euro, ISBN 978-3-86788-962-9 DOI: 10.4419/86788962



This paper reexamines the relation between minimum wages and labor market outcomes for teenagers in the US. Economic theory suggests that real minimum wages drive labor market outcomes. Instead of the commonly used nominal minimum wages, we therefore use real minimum wages to examine this relation. Increasing real minimum wages are associated with a reduction in teen employment and working hours. The correlation with real hourly wages of teenagers is positive. These results are robust to the choice of the control group, whether we compare labor market outcomes in the respective state to all other states or to spatially close states, only. This strongly suggests that interpreting nominal minimum wage changes as minimum wage shocks is not a valid identification strategy.

JEL-Classification: J3, J48

Keywords: Minimum wage; teen employment; teen working hours; teen wages; state panel; US