The Low-Wage Labor Market: Challenges and Opportunities for Economic Self-Sufficiency. Does the Minimum Wage Help or Hurt Low-Wage Workers? . Footnotes

01/14/2000

1  The remaining 42.9 million workers were found to be not subject to or exempt from the minimum wage.  For example, workers not subject to the minimum wage provisions often are employed by businesses with less than $500,000 in annual gross receipts; workers who are exempt most often are in executive, administrative, and professional occupations (U.S. Department of Labor (1998)).

2  Where state law requires a higher minimum wage, that higher standard applies.

3  The 1996 FLSA amendments included provisions for a youth minimum wage.  The youth minimum wage provisions maintained the $4.25 minimum wage for employees under 20 years of age during their first 90 consecutive calendar days on the job.

4  Family income is less than 150 percent the poverty level for the appropriate family size.

5  See Deere, Murphy, and Welch (1996, p. 33-36) for a similar discussion that also incorporates disemployment effects.

6  Spriggs and Klein (1994).

7  See Brown, Gilroy, and Kohen (1982) for a description of a simple supply-demand model that shows higher minimum wages lead to lower employment.  This adverse effect may take the form of a lower rate of employment growth rather than an actual decline in the number employed.  Or, if employment actually declined, it may take the form of not replacing workers who quit rather than discharging workers.  The monopolistic model is a well-known exception where minimum wages increase employment.

8  Unit elasticity between employment and the minimum wage would mean that a 10 percent hike in the minimum wage reduces employment by 10 percent.

9  See Card and Krueger (1995).

10  Most nationally representative surveys (i.e., Current Population Surveys) do not collect labor market information from respondents younger than 16 years old.

11  Since 1970, researchers have conducted more than 30 time-series studies of the effect of the minimum wage in the United States. A typical study relates the employment-population rate of teenagers to a variable indicating the importance of the minimum wage (e.g., the Kaitz index is the coverage-weighted minimum wage relative to the average wage in the industry).

12  Borrowing from the natural sciences, Card and Krueger compared the labor market outcomes of the "treatment" and "control" groups that arise naturally when the minimum wage increases for one group of workers, but not for another.

13  Card and Krueger argue that this increase in the minimum wage in New Jersey was particularly appealing as a natural experiment, because whether it would be allowed to take effect as scheduled under legislation enacted earlier remained uncertain until its effective date.

14  Evans and Turner (1995).

15  Brown et al. (1982).

16  Neumark and Wascher (1996b).

17  In contrast to Neumark and Wascher's findings, Turner (1998) found that minimum wages had a statistically imprecise effect on the employment status of minority teens not enrolled in school.

18  Hashimoto (1982).

19  An increase in the minimum wage results in offsetting effects regarding school enrollment — the substitution and income effects.  The substitution effect would cause students to work part-time while enrolled in school or possibly leave school and work full-time because the relative return to work increased.  The income effect would cause teens to stay in school or enroll in school because wages and the returns to educational attainment are positively related.

20  The following articles examine the effects of minimum wages on school enrollment status:  Turner (1998b); Neumark and Wascher (1992 and 1996b); Evans and Turner (1995); Ehrenberg and Marcus (1982); and Cunningham (1981).

21  Neumark and Wascher (1992 and 1996b) counted teenagers as enrolled only if they reported their major activity during the survey week as "going to school."  If a student reported his major activity as "working," he was not asked about school enrollment and was therefore not classified as enrolled.  Research by Evans and Turner (1995), using the October CPS, showed that the Neumark and Wascher measure of school enrollment systematically understates the proportion of teens in school by 7.4 percentage points and understates full-time enrollment by 5.6 percentage points.  Notably, the definition of school enrollment affected estimates of whether a higher minimum wage significantly altered teens' school enrollment and employment status.

22  Rosen (1972); Welch (1978); and Neumark and Wascher (1998).

23  Pavetti (1993).

24  The other confounding factors included state average wages, mothers' educational attainment, work history, age, race, number of children, age of youngest child, living arrangements, state Aid to Families with Dependent Children (AFDC) benefit levels, and state unemployment rates.

25  Acs, et al. (1998).