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Title: The Unexpected Long-Run Impact of the Minimum Wage: An Educational Cascade
Citation Type: Conference Paper
Publication Year: 2008
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Abstract: Neglected, but significant, the long-run consequence of the minimum wage requirement which was madenational policy in the United States in 1938 is its stimulation of capital deepening. This took two forms.First, the engineered shortage of low-skill, low-paying jobs induced teenagers to invest in additional humancapital primarily by extending their schooling in an attempt to raise their productivity to the levelrequired to gain employment. Second, employers faced with an inability to legally hire low-wage workers,rearranged their production processes to substitute capital for low-skill labor and to innovate newtechnologies . This preliminary report explores the impact of the minimum wage on enrollments between1950 and 2003. I describe an upward ratcheting mechanism which triggers an educational cascade. Mypreliminary estimate is that the average number of years of high school enrollment would have risen to only3.5 years, rather than 3.7 years, for men born in 1951 (17 in 1968). Thereafter, enrollment rates wouldhave trended down to about 3.2 years for the cohort born in 1986, rather than slowly rising to around 3.9years. The cumulative effect of the minimum wage increases beginning in 1950 was to add 0.7 years to theaverage high school experience of men born in 1986.
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Authors: Sutch, Richard
Conference Name: Conference on Historical Aproaches to Economics
Publisher Location: Stanford University, Palo Alto, CA
Data Collections: IPUMS USA
Topics: Labor Force and Occupational Structure, Poverty and Welfare
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