The effect of the minimum wage on employment and hours

Abstract

This study examines the effect of minimum wage increases on teen hours of work and employment using both state- and individual-level panel data in the US. The state-level results indicate that minimum wage increases may lower employment rates but do not adversely affect hours among either working teens or all teens. The individual-level results do not indicate that minimum wage increases have a significant negative effect on hours worked by low-wage teens who are likely to be affected by a minimum wage increase. The results suggest that low-wage teens are less likely to remain employed, relative to high-wage teens, when the minimum wage is raised. However, this adverse effect disappears when these low-wage teens are compared to other low-wage teens during periods when the minimum wage did not increase.