New Study Finds Minimum Wage Laws Harm Teen Employment

Mitchell Rolling

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A new study published by the Mercatus Center suggests one thing as being the “predominant factor” for lowered teen employment, especially from ages 16 to 19 – and it’s nothing new. 

Minimum wage increases are the main cause for declining teenage employment.

The study, “Declining Teen Employment,” was composed by David Neumark and Cortnie Shupe and asked questions regarding declining teen employment throughout the 2000s and whether these reasons had any impact on human capital investment. They explored three possible reasons for the decline: rising minimum wages, “rising returns to schooling,” and increased competition from immigrants.

The results show that both increased minimum wages and immigrant levels had a role in the decline of employed teens, although minimum wages were more influential. In fact, the study shows that minimum wage increases “explain about a quarter of the shift” from students both employed and enrolled in school to “being exclusively in school.”

This is not necessarily a new assertion. For years, conservatives have been stressing the adverse effects that minimum wage laws have on employment opportunities. Like in this video of Sen. Bernie Sanders on CNN where he falsely claimed it is “historically not true” that higher minimum wages kill jobs. Former economic advisor to John McCain, Douglas Holtz-Eakin, repeatedly called out Sanders for ignoring the fact that many hard-working American do lose opportunities for employment because of higher minimum wages – and specifically minority teenagers.

This study points out that from 1994 to 2014 employment participation of ages 16 to 19 have decreased from 52.7 percent to 34 percent, specifically caused by the effects of rising minimum wages. This was not seen by other age groups from 25 to 54 and 55 and older.

Economic genius Milton Friedman also mentioned this in many of his lectures and debates throughout the years. This following quote is especially relevant; “A minimum-wage law is, in reality, a law that makes it illegal for an employer to hire a person with limited skills.” 

That’s exactly what is happening. Teenagers have very little education and experience to offer employers and low-paying jobs allow them an opportunity to gain both. Due to increasing minimum wages, teenagers are losing out on fundamental steps in the development of their careers. 

The study also finds that there is “no evidence” that reflects “greater human capital investment that would raise future earnings.” In fact, this research claims that “the evidence is in the other direction.”

It continues, asserting that “it is more likely that the principal effect of higher minimum wages in the 2000s, in terms of human capital, was to reduce employment opportunities that could enhance labor market experiences.” 

Will this evidence giving credence to those opposed to minimum wage hikes have any impact on political policies? Probably not. 

The people arguing for a higher minimum wage will be the first to tell you that there is no economic basis for such a proposal. Just watch Robert Reich explain the case for a $15.00 minimum wage here, and notice how he does not use a single economic theory to back any of his claims.

My personal favorite is reason four. While the screen shows “4) Increased minimum wage = More jobs,” he begins explaining by contradicting himself, saying, “Now some jobs may be lost if the minimum wage is raised to $15.” True. He continues, saying, “but many more people will be lifted out of poverty,” because “low-wage earners” will spend more money creating jobs in the process.

See how that works? We just have to raise the minimum wage incrementally and allow “some” of the lowest wage earners in the country – or those in poverty – to lose their jobs while expecting the ones who don’t – most likely managers who are not in poverty – to spend their wage increases and create more jobs as a result.

It’s that simple… for those on the Left looking for any nonsensical justification to sacrifice jobs in the name of catchy phrases like offering “a living wage.” 

I can compromise on having an absolute bare minimum for what employers can set their wages at; but not above what the market dictates. There is simply no reasonable justification for a $10 minimum wage, let alone $15. These prices cannot be universally met by all businesses – small and big – and to set distinctions between the two is too complex for know-nothing politicians to get right. 

Let the market and personal career decisions dictate who gets paid how much, and keep unqualified legislators out of it.