Declining Teen Employment: Minimum Wages, Other Explanations, and Implications for Human Capital Investment
62 Pages Posted: 27 Apr 2018
Date Written: February 7, 2018
We explore the decline in teen employment in the United States since 2000, which was sharpest for those age 16–17. We consider three explanatory factors: a rising minimum wage that could reduce employment opportunities for teens and potentially increase the value of investing in schooling; rising returns to schooling; and increasing competition from immigrants that, like the minimum wage, could reduce employment opportunities and raise the returns to human capital investment. We find that higher minimum wages are the predominant factor explaining changes in the schooling and workforce behavior of those age 16–17 since 2000. We also consider implications for human capital. Higher minimum wages have led both to fewer teens in school and employed at the same time, and to more teens in school but not employed, which is potentially consistent with a greater focus on schooling. We find no evidence that higher minimum wages have led to greater human capital investment. If anything, the evidence points to adverse effects on longer-run earnings for those exposed to these higher minimum wages as teenagers.
Keywords: minimum wage, immigration, schooling, human capital, wages, income, earnings, youth
JEL Classification: J22, J23, J24
Suggested Citation: Suggested Citation