I already talked about the learning wage, mostly talking about theory. This post will focus on some empirical evidence regarding minimum wages, employment, and long-term effects.
An important study by the National Bureau of Economic Research, or NBER, has a study on the minimum wage increases from 2007, 2008, and 2009. The study convincingly showed that minimum wage increases reduce employment opportunities for low-skilled workers. These opportunities would exist if we had a learning wage--or a minimum wage of $0--and they would be better off in the long term. The employment effects led to reduce income mobility--in other words, it made it harder to move up the income ladder--by reducing skills which would otherwise have been acquired had the minimum wage not priced them out of the job market. The study found a very large effect on employment, concluding by saying "We infer from our employment estimates that minimum wage increases reduced the national employment-to-population ratio by 0.7 percentage point between December 2006 and December 2012. As noted above, this accounts for 14 percent of the national decline in the employment-to-population ratio over this period." This is no small effect. And all of the studies showing poverty reduction assume no employment effect; this study erases any doubt of there being an employment effect.
A 2002 study by economists David Neumark and William Wascher found that minimum wages reduce school enrollment. The study also noted how minimum wages also reduce on the job training, which further reduces the amount of skills teenagers gain in the workforce.
A 2001 study by economists Duncan D. Chaplin, Mark D. Turner and Andreas D. Pape come to the same conclusions that Neumark and Wascher came to. Their study found that higher minimum wages increased drop out rates. The mechanism for this is because teenagers assume they will be paid more if they drop out and get a job. But as noted, in many cases, they are unemployable because their skills are not worth, say, $7 an hour. This means we not only increase the youth unemployment rate, but also the high school dropout rate.
A 2006 study by Neumark and Wascher found that those exposed to high minimum wages as a teenager work less and earn less in adulthood. This effect is probably driven from reduced training and schooling during their youth.
There are hundreds of more research studies, but if you read the literature, one thing is clear: increases in the minimum wage always end up harming those who are supposed to benefit from said wage increases. The evidence for instituting a learning, rather than a living, wage is supported by both economic theory and empirical fact.
An important study by the National Bureau of Economic Research, or NBER, has a study on the minimum wage increases from 2007, 2008, and 2009. The study convincingly showed that minimum wage increases reduce employment opportunities for low-skilled workers. These opportunities would exist if we had a learning wage--or a minimum wage of $0--and they would be better off in the long term. The employment effects led to reduce income mobility--in other words, it made it harder to move up the income ladder--by reducing skills which would otherwise have been acquired had the minimum wage not priced them out of the job market. The study found a very large effect on employment, concluding by saying "We infer from our employment estimates that minimum wage increases reduced the national employment-to-population ratio by 0.7 percentage point between December 2006 and December 2012. As noted above, this accounts for 14 percent of the national decline in the employment-to-population ratio over this period." This is no small effect. And all of the studies showing poverty reduction assume no employment effect; this study erases any doubt of there being an employment effect.
A 2002 study by economists David Neumark and William Wascher found that minimum wages reduce school enrollment. The study also noted how minimum wages also reduce on the job training, which further reduces the amount of skills teenagers gain in the workforce.
A 2001 study by economists Duncan D. Chaplin, Mark D. Turner and Andreas D. Pape come to the same conclusions that Neumark and Wascher came to. Their study found that higher minimum wages increased drop out rates. The mechanism for this is because teenagers assume they will be paid more if they drop out and get a job. But as noted, in many cases, they are unemployable because their skills are not worth, say, $7 an hour. This means we not only increase the youth unemployment rate, but also the high school dropout rate.
A 2006 study by Neumark and Wascher found that those exposed to high minimum wages as a teenager work less and earn less in adulthood. This effect is probably driven from reduced training and schooling during their youth.
There are hundreds of more research studies, but if you read the literature, one thing is clear: increases in the minimum wage always end up harming those who are supposed to benefit from said wage increases. The evidence for instituting a learning, rather than a living, wage is supported by both economic theory and empirical fact.
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