Study: Minimum Wage Increases Are Reducing Jobs For Teens

Charles Blahous, Economics21

One of the leading economic policy challenges of our time is the persistent decline in workforce participation among working-age Americans. Economists from left to righthave cited declining workforce growth as one of the principal barriers to our future economic growth, and thus to our future prosperity.  It’s important to understand the causes of declining workforce participation if we are to take effective action to mitigate it.  Unfortunately, economists are still struggling to fully understand -- let alone offer consensus solutions to -- this problem.

recent study performed for the Mercatus Center by renowned labor economist David Neumark and Cortnie Shupe explores an especially illustrative trend: specifically, declining work by teens aged 16-19.   While workforce participation by young US adults has been in general decline for the last few decades, the decline among teenagers has been especially steep.  In 1994 the labor force participation rate of all those aged 16-24 stood at over 66 percent but declined to 55 percent by 2014.  This decline was sharpest among individuals aged 16-19: their job-holding rate dropped from nearly 53 percent in 1994 to just 34 percent in 2014.

The reasons for this decline matter, both to our understanding and to the welfare of the individuals involved.  If the work decline has occurred simply because teens and their families are correctly calculating that they are better off staying in school without simultaneously holding a job, then the trend might be benign.  If so, we might expect these individuals to add to their long-term earnings potential by delaying their entry into the job market.  But if instead the decline has occurred because it is getting harder for teenagers to find work they would otherwise benefit from, that is a problem warranting solution.

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