Full Citation
Title: Dollars and Dropouts: The Minimum Wage and Schooling Decisions of Teenagers
Citation Type: Miscellaneous
Publication Year: 2014
ISBN:
ISSN:
DOI:
NSFID:
PMCID:
PMID:
Abstract: While the possible disemployment effect of the minimum wage on teenagers has been the subject of contentious debate, comparatively little attention has been paid to the impact of the minimum wage on teen educational outcomes. This is surprising given that education is more directly linked to the later-life success of teenagers than is teen employment. In this paper, I investigate the educational effects of changes in the minimum wage, looking specifically at high school dropout decisions. I identify the effect of the minimum wage using two sources of variation (within state over time and cross-border at one point in time) and three individual-level datasets (ACS, CPS, and SIPP). I consistently find that a 10% increase in the minimum wage lowers the likelihood of dropping out for low-SES teenagers by 0.5-0.9 percentage points, roughly 4-10% of the groups dropout rate, but has no effect on higher-SES teenagers. Additionally, I find that an increase in the minimum wage has a negative effect on hours worked that is concentrated at the upper tail of the hours distribution (not at the employment margin) for low-SES teens, but not for other young and similarly low-skilled groups. Taken together, these findings suggest that an increase in the minimum wage generates an income effect on low-SES teens, which leads them to shift their allocation of time to school-related activities and away from paid work.
Url: http://people.virginia.edu/~aas6sf/MWHS_AlexSmith_FULL.pdf
User Submitted?: No
Authors: Smith, Alex
Publisher: University of Virginia
Data Collections: IPUMS USA, IPUMS CPS
Topics: Education, Labor Force and Occupational Structure, Other
Countries: