Labor «Hirptu« ejn-mpkrfmentl

Labor demand


-Jemand teenagers are willing to work as "interns* for no pay at all. Because internships pay nothing, however, the minimum wage does not apply to them. If ii did, these jobs might not exist.) As a result, tin- minimum wage is more often binding for teenagers than for other members of the labor force.

Many economists have studied how minimum-wage laws affect the teenage labor market. These researchers compare the changes in the minimum wage over time with the changes in teenage employment. Although there is some debate about how much the minimum wage affects employment, the typical study finds that a 10 percent increase in the minimum wage depresses teenage employment between 1 and 3 percent. In interpreting this estimate, note that a 10 percent increase in the minimum wage does raise the average wage of teenagers by 10 percent, A change in the law does not directly affect those teenagers who are already paid well above the minimum, and enforcement of minimum-wage laws is not perfect Thus, the estimated drop in employment of 1 to 3 percent is significant.

In addition to altering the quantity of labor demanded, the minimum wage alters the quantity supplied. Because the minimum wage raises the wage that teenagers can earn, it increases the number of teenagers who choose to look for jobs. Studies have found that a higher minimum wage influences which teenagers are employed. When the minimum wage rises, some teenagers who are still attending school choose to drop out and take jobs. Tliese new dropouts displace Other teenagers who had already dropped out of school and who now become unemployed.

The minimum wage is a frequent topk of debate. Economists are about evenly divided on the issue. In a 2006 survey of PhD economists, 47 percent favored eliminating the minimum wage, while l-l percent would maintain it at it» current level and 38 percent would increase it.

Advocates of the minimum wage view the policy as one way to raise the income of the working poor. They correctly point out that workers who earn the minimum wage can afford only a meager standard of living. In 2(107. lor instance, when the minimum wage was $5.15 per hour, two adults working 40 hours a week for every week of the year at minimum-wage jobs had a total annual income of only $21,424, which was less than half of the median family income. Many advocates of the minimum wage admit that it has some adverse effects, including unemployment, but they believe that these effects are small and that, all things considered, a higher minimum wage makes the poor better off.

Opponents of the minimum wage contend that it is not the best way to combat poverty. They note that a high minimum wage causes unemployment, encourages teenagers to drop out of school, and prevents some unskilled workers from getting the on-the-job training they need. Moreover, opponents of the minimum wage point out tltat it is a poorly targeted policy. Not alt minimum-wage workers are heads of households trying to help their fa milk's escape poverty. In fact, fewer than a third of minimum-wage earners .ire in families with incomes below the poverty line. Many are teenagers from middle-class homes working at part-time jobs for extra spending money- •

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