Skip to main content

Advertisement

SpringerLink
Log in

Effects of Local, State, and Federal Minimum Wage on Employment Growth among Teenagers in the Restaurant Industry

  • Published:
International Advances in Economic Research Aims and scope Submit manuscript

Abstract

Over the last 20 years, local municipalities have been implementing minimum wage ordinances at an accelerated rate. These local changes, along with state and federal minimum wage increases, are included in the examination of the impact of minimum wage hikes on employment growth of teenagers in the food services and drinking places subsector. While most minimum wage research focuses on employment levels, recent contributions highlight the importance of analyzing employment growth. Following this trend, this study focuses on teenagers within the restaurant industry to test for the impact of minimum wages on inexperienced workers. Using a distributed-lag model, the results show that an increase in a minimum wage reduces employment growth for teenagers within this subsector. The effects of minimum wages within this demographic were most strongly felt in the first three years following an increase in minimum wage. Specifically, the results show that a 10% increase in the minimum wage decreases the employment growth rate by approximately 2.27% over a period of three years.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Notes

  1. See Neumark and Wascher (2007) for a detailed list of studies and their sample demographics.

  2. See Neumark et al. (2014) and Allegretto et al. (2017) for further discussion on suitable econometric strategies for measuring the effects of minimum wage.

  3. Totty (2017) emphasized that larger minimum wage increases may lead to larger negative employment effects.

  4. For further detail of these criticisms, see Neumark et al. (2014).

  5. For benefits and costs for these models (and alternative models), see Meer and West (2016).

  6. Further in the paper, these results were compared to the employment effects on teenagers and the restaurant industry. The weight used was the total country population, as dividing by teenage population would lead to inaccurate results.

  7. See Meer and West (2016) for further clarification.

  8. The local jurisdictions in our dataset are: Albuquerque, NM; Bangor, ME; Berkley, CA; Bernalillo, NM; Chicago, IL; Cook County, IL; Cupertino, CA; El Cerrito, CA; Emeryville, CA; Flagstaff, AZ; Johnson County, IA; Las Cruces, NM; Los Altos, CA; Los Angeles, CA; Los Angeles County, CA; Louisville, KY; Malibu, CA; Milpitas, CA; Montgomery County, MD; Mountain View, CA; Oakland, CA; Palo Alto, CA; Pasadena, CA; Portland, CA; Prince George County, MD; Richmond, CA; San Diego, CA; San Francisco, CA; San Jose, CA; San Leandro, CA; San Mateo, CA; Santa Clara, CA; Santa Fe, NM; Santa Fe County, NM; Santa Monica, CA; Seattle, WA; Sunnyvale, CA; Tacoma, WA; Washington D.C.

  9. A similar method was used in assigning a minimum wage value for counties (without a minimum wage increase) with state and federal minimum wage increases. The largest value between state and federal minimum wage was used as each jurisdiction’s value.

  10. As there were no data available for gross county product, GSP was used instead. However, as GSP was used to control for productivity and business cycle variations, it should still fulfill the same role even at the county level. For more details on the benefits and cost of these control variables, see Meer and West (2013, 2016) and Dube (2013).

  11. As an example, from the dataset which includes 3141 counties, only 44 counties had more than one million in population total for the first quarter of 2017. The dataset contains 3112 counties for quarter one of 2017, because 29 county equivalences were dropped from Alaska which did not contain 2017 data.

  12. This is consistent with the findings in Meer and West (2016).

  13. For all industries and age groups, employment was weighted by total population multiplied by the share of population 15 through 59. This term was logged.

References

  • Aaronson, D., French, E., Sorkin, I., & Ted to. (2018). Industry dynamics and the minimum wage: A putty-clay approach. International Economic Review, 59(1), 51–84.

    Article  Google Scholar 

  • Allegretto, S., Dube, A., & Reich, M. (2011). Do minimum wages really reduce teen employment? Accounting for heterogeneity and selectivity in state panel data. Industrial Relations, 50(2), 205–240.

    Google Scholar 

  • Allegretto, S., Dube, A., Reich, M., & Zipperer, B. (2017). Credible research designs for minimum wage studies: A response to Neumark, Salas, and Wascher. Industrial and Labor Relations Review, 70(3), 559–592.

    Article  Google Scholar 

  • Autor, D. H., Manning, A., & Smith, C. L. (2016). The contribution of the minimum wage to US wage inequality over three decades: A reassessment. American Economic Journal: Applied Economics, 8(1), 58–99.

    Google Scholar 

  • Card, D., & Krueger, A. B. (1994). Minimum wages and employment: A case study of the fast-food industry in New Jersey and Pennsylvania. The American Economic Review, 84(4), 772–793.

    Google Scholar 

  • Cengiz, D., Dube, A., Lindner, A., & Zipperer, B. (2019). The effect of minimum wages on low-wage jobs. The Quarterly Journal of Economics, 134(3), 1405–1454.

    Article  Google Scholar 

  • Dube, A., Naidu, S., & Reich, M. (2007). The economic effects of a citywide minimum wage. Industrial and Labor Relations Review, 60(4), 522–543.

    Article  Google Scholar 

  • Dube, A., William Lester, T., & Reich, M. (2010). Minimum wage effects across state Borders: Estimates using contiguous counties. Review of Economics and Statistics, 92(4), 945–964.

    Article  Google Scholar 

  • Dube, A., William Lester, T., & Reich, M. (2016). Minimum wage shocks, employment flows, and Labor market frictions. Journal of Labor Economics, 34(3), 663–704.

    Article  Google Scholar 

  • Dube, Arindrajit. (2013). “Minimum Wages and Aggregate Job Growth: Causal Effect or Statistical Artifact?” IZA Discussion Paper, 7674. Available at http://ftp.iza.org/dp7674.pdf

  • Jardim, Ekaterina, Mark C. Long, Robert Plotnick, Emma Van Inwegen, Jacob Vigdor, and Hilary Wething. (2017). “Minimum Wage Increases, Wages, and Low-Wage Employment: Evidence from Seattle.” National Bureau of Economic Research, Working Paper 23532.

  • Meer, Jonathan, and Jeremy West. (2013). "Supplemental appendix for effects of the minimum wage on employment dynamics." Available at http://people.tamu.edu/~jmeer/Meer_West_MinimumWage_Appendix.pdf

  • Meer, J., & West, J. (2016). Effects of the minimum wage on employment dynamics. Journal of Human Resources, 51(2), 500–522.

    Article  Google Scholar 

  • Nadler, Carl, Sylvia Allegretto, Anna Godoey, and Michael Reich. 2019. “Are local minimum wages too high?” UC Berkeley: Institute for Research on Labor and Employment. Working paper #102-19. Retrieved from https://escholarship.org/uc/item/7xt8716f

  • Neumark, D., & Wascher, W. L. (2007). Minimum wages and employment. Foundations and Trends® in Microeconomics, 3(1–2), 1–182.

    Article  Google Scholar 

  • Neumark, D., Ian Salas, J. M., & Wascher, W. L. (2014). Revisiting the minimum wage—Employment debate: Throwing out the baby with the bathwater? Industrial and Labor Relations Review, 67(3 suppl), 608–648.

    Article  Google Scholar 

  • Orrenius, P. M., & Zavodny, M. (2008). The effect of minimum wages on immigrants’ employment and earnings. Industrial and Labor Relations Review, 61(4), 544–563.

    Article  Google Scholar 

  • Sorkin, I. (2015). Are there long-run effects of the minimum wage? Review of Economic Dynamics, 18(2), 306–333.

    Article  Google Scholar 

  • Stigler, G. J. (1946). The economics of minimum wage legislation. The American Economic Review, 36(3), 358–365.

    Google Scholar 

  • Totty, E. (2017). The effect of minimum wages on employment: A factor model approach. Economic Inquiry, 55, 1712–1737.

    Article  Google Scholar 

  • UC Berkeley Labor Center (2018), Inventory of US City and county minimum wage ordinances (2000-2017). Retrieved from http://laborcenter.berkeley.edu/minimum-wage-living-wage-resources/inventory-of-us-city-and-county-minimum-wage-ordinances/. Accessed on June, 2018.

  • U.S. Bureau of Economic Analysis (2018), Annual gross domestic product (GDP) by state (2000-2017). Retrieved from https://apps.bea.gov/regional/downloadzip.cfm. Accessed on June, 2018.

  • U.S. Bureau of Labor Statistics (2018), Consumer Price index for all urban consumers: U.S. City average (2017). Retrieved from https://www.bls.gov/cpi/data.htm. Accessed on June, 2018.

  • U.S. Census Bureau (2018a). Quarterly Workforce Indicators (2000–2017). Washington, DC: U.S. Census Bureau, Longitudinal-Employer Household Dynamics Program, accessed on June 2018 at https://lehd.ces.census.gov/data/#qwi.

  • U.S. Census Bureau (2018b). Population Estimates (2000–2017). Retrieved from https://www.census.gov/topics/population/data.html. Accessed on June, 2018.

  • Vaghul, Kavya and Ben Zipperer. 2016. “Historical state and sub-state minimum wage data.” Washington Center for Equitable Growth, Working Paper Series. (2000–2016). Retrieved from https://equitablegrowth.org/working-papers/historical-state-and-sub-state-minimum-wage-data/. Accessed on June, 2018.

  • Wessels, W. J. (2005). Does the minimum wage drive teenagers out of the Labor force? Journal of Labor Research, 26(1), 169–176.

    Article  Google Scholar 

Download references

Funding

We are grateful to Gustavus Adolphus College for supporting this project through the Presidential Faculty-Student Collaboration Grant.

Author information

Authors and Affiliations

  1. West Virginia University, 1601 University Ave., Morgantown, WV, 26505, USA

    Shaun Gilyard

  2. Gustavus Adolphus College, 800 W College Ave., St Peter, MN, 56082, USA

    Marta Podemska-Mikluch

Authors
  1. Shaun Gilyard
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Marta Podemska-Mikluch
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Marta Podemska-Mikluch.

Additional information

Publisher’s Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Gilyard, S., Podemska-Mikluch, M. Effects of Local, State, and Federal Minimum Wage on Employment Growth among Teenagers in the Restaurant Industry. Int Adv Econ Res 26, 89–101 (2020). https://doi.org/10.1007/s11294-020-09770-8

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11294-020-09770-8

Keywords

JEL Classification

Search

Navigation