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Yet More Evidence that Minimum Wages Do Indeed Have Negative Employment Effects

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In this newly released paper from the Mercatus Center, economists David Neumark and Cortnie Shupe find that minimum wages cause less employment of 16 and 17 year olds [2].  This finding, of course, is of no surprise to anyone who grasps economics, but it is nevertheless important given the determination of so many people to deny economic reality in their attempts to protect their fantasy that minimum wages either have no costs at all or have costs that are absorbed exclusively by people other than low-wage workers.

Here’s a slice from the Mercatus Center’s blurb about the paper:

The labor force participation and employment rates of young adults in the United States have declined sharply in recent years, especially among teenagers. The overall decline in the rate of labor force participation since the Great Recession has received a great deal of attention from researchers and policymakers, who focus in large part on trying to gauge whether this decline is permanent and what it implies about how tight the labor market is. However, the decline in labor force participation of young adults has been going on for much longer and does not coincide with swings in economic activity.

David Neumark and Cortnie Shupe consider three possible explanations for the decline in teen employment in the United States since 2000, with a particular focus on those age 16–17: (1) a rising minimum wage that could reduce employment opportunities for teens and potentially also increase the value of investing in schooling; (2) rising returns to schooling; and (3) increasing competition from immigrants. The higher minimum wage is the predominant factor explaining changes in the behavior of teens age 16–17 since 2000. Additionally, no evidence was found to suggest that higher minimum wages for teens leads to higher future earnings; if anything, the evidence points to the opposite effect.

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