The minimum wage is regarded as a key policy tool that can be used to improve the earnings of low-wage workers and reduce income inequality. Young workers are particularly impacted by state and local minimum wage laws, given their prevalence in industries that rely on minimum wage labor, their low geographic mobility, and their early career stage. At the same time, minimum wage increases can also heighten inequality by making jobs more appealing to teenage workers from middle class families or by spurring firms to replace costly labor with technology. The team will use a difference-in-differences approach to examine the short- and longer-term impacts of minimum-wage increases on the labor market trajectories of young adults by economic standing, race, and gender. The study will include demographic and household data on youth who turned 18 during 2000-12 from the American Community Survey and 2000 Census (around 600,000 individuals). Data on labor market outcomes in the short-term (ages 18-24) and longer term (25-29) will come from the Longitudinal Employer Household Dynamics (LEHD). The team will also examine how firms respond to these policies by constructing a measure of firms’ exposure to minimum wage adjustments and using a difference-in-differences approach to explore whether firms turn to technological tools to counter rising labor costs. Findings will provide evidence on the impact of minimum wage increases and may inform ongoing debates about minimum wage policies.
Do state minimum wage increases reduce inequalities in labor market outcomes between young adults from low-income families and those from higher-income families?
