The Federal Minimum Wage: The Effects of the Minimum Wage on the Youth Employment and School Enrollment

The minimum wage has been a prominent topic of discussion among labor economists. According to Neumark and Wascher, the minimum wage has been a core element of public policy for several decades. The effects of minimum wage were brought back to light during the State of the Union address by President Obama, in which he proposed increasing the minimum wage to $9.00, a 24% increase. This capstone project contributes to the discussion in determining the effects of the change in minimum wage on the youth population. The study uses aggregate data spanning nineteen years, from 1985 and 1990 to 2007. The youth population is divided into four mutually exclusive categories of youth activity distinguished by employment status and enrollment status. The data are analyzed with the help of a time-series regression model. The results of the time series regression analysis suggests that, in general, the state of the economy has a higher effect on the youth enrollment and youth employment rather than the change in the minimum wage, over the time period 1985, 1990-2007. The change in the minimum wage only affected one group of youth - the proportion of individuals enrolled in school and not employed. Other groups were not affected by the change in the minimum wage. Furthermore, this study finds a statistically significant relationship between change in the minimum wage and the change in the youth labor force participation rate. The conclusion is that, overall, as the minimum wage goes up, fewer teenagers participate in the labor force