Saturday, July 24, 2010

Does an increase in the Minimum Wage hurt teen employment? Textbook says it does, but maybe Grandpa has a different opinion.

In today's WSJ there is an editorial relating the recent increases in the minimum wage to an increase in unemployment among the teenage population.  Every introductory economics textbook tells us this relationship exists, but there is some controversy (at the margins) about how much of an effect it actually has.  As with many things economics lately, there is another variable(s) to consider.  Look at the chart below....
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Statistically, there are more 65+ people in the job market at the lower ends of the pay scale then teenagers (a relatively new development, demographically speaking.  So, perhaps it is not as cut and dry to say that the increase in the minimum wage has reduced teen employment.  Perhaps "the olds" are being employed at a higher rate than teenagers.  I don't know the answer, I just pose the question that the WSJ does not address  I suppose one would have to look at the hiring rate of the 65+ group and see if there is a connection.  Might be a good research paper for someone...
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