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November 2020 Newsletter

Do they reduce youths’ lifetime income?

The effects of minimum wages on youth employment and income

Earlier this month, joining seven other states in voting for a $15 an hour minimum wage, voters in Florida approved proposals to raise the state’s minimum wage. More than 60% of the state's population approved a constitutional amendment
to lift minimum wages by 2026.

But what impact might the minimum wage have on youth employment and income?

According to IZA Contributor Charlene Marie Kalenkoski, the evidence shows that minimum wages reduce entry-level jobs, training, and lifetime income.

Policymakers often propose minimum wages as a way of raising workers’ incomes and thus lifting them out of poverty. However, there is a substantial body of research that shows the negative effects of minimum wages on employment.

Because youths are often the largest beneficiaries of minimum wages, policymakers need to know how minimum wages affect youth employment before
implementing such policies.

When a minimum wage is imposed or raised, the hourly wage of young workers rises. However, employers respond to the increased hourly labor cost for young workers by reducing their hours of work, cutting jobs, or both. In addition, because more youths seek jobs at the higher wage, a gap is created between the number of jobs desired and those available, creating youth unemployment.

Young adults without a job then impose a financial burden on their families or on the social welfare system, while delayed entry into the labor force reduces youths’ lifetime earnings. In addition, employers may reduce or eliminate on-the-job training opportunities that they had previously funded through low entry-level/training wages, thereby also contributing to lower human capital accumulation and lower lifetime incomes.

Rather than using a minimum wage to increase youths’ current incomes, Kalenkoski argues policymakers should consider policies that improve the labor market opportunities of young people but do not increase the cost to employers of hiring young workers.

To find out what policies would achieve both goals, read
Charlene Marie Kalenkoski's article:
The effects of minimum wages on youth employment and income

It is with great sadness that we announce the passing of Edward Lazear, Stanford University professor, and one of the first contributors to IZA World of Labor.

In his honor, today's featured article is
Structural or cyclic? Labor markets in recessions.

IZA World of Labor author Edward Lazear passes away

The Stanford economist and presidential adviser has died at the
age of 72.

For commentary on the effects of Covid-19 see
Covid-19: Pandemics and the labor market.

See National responses to Covid-19 for expert perspectives on the effects of the pandemic on individual countries or cities.

Employment effects of minimum wages (Deutsch) (Español)

by David Neumark

How are minimum wages set? (Deutsch)

by Richard Dickens

Do minimum wages stimulate productivity and growth? (Deutsch) (Español)

by Joseph J. Sabia

Does increasing the minimum wage reduce poverty in developing countries? (Deutsch) (Español)

by T. H. Gindling

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To find out what policies would achieve both goals, read Charlene Marie Kalenkoski's article: The effects of minimum wages on youth employment and income

It is with great sadness that we announce the passing of Edward Lazear, Stanford University professor, and one of the first contributors to IZA World of Labor. In his honor, today's featured article is Structural or cyclic? Labor markets in recessions.

For commentary on the effects of Covid-19 see Covid-19: Pandemics and the labor market. See National responses to Covid-19 for expert perspectives on the effects of the pandemic on individual countries or cities.

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