The disemployment effects of minimum wages continue to be debated. If a minimum wage does reduce employment though, we would expect it to have the greatest effect on young people and workers with low human capital. So, when a minimum wage is increased, we might expect some teenagers to be disemployed, and those that are not will receive a higher income.
In a new article published in the journal Economics Letters (sorry, I don't see an ungated version), Otto Lenhart (University of Strathclyde) looks at the effects of the minimum wage on teenage birth rates. As Lenhart notes, there are a number of reasons to believe that the minimum wage might have an effect on teenage pregnancy, but not all of the potential effects work in the same direction. Lower time spent working frees up time for 'leisure activities', but if it also lowers income it reduces the resources available for raising children. On the other hand, higher income for those that remain employed provides better access to health resources, including health messages and contraception. It also raises the opportunity cost of time that could be employed in raising children, or in 'leisure activities'. So, theory doesn't provide a definitive answer as to whether a higher minimum wage would decrease, or increase, teenage pregnancy.
Lenhart uses U.S. state-level data on teenage (15-19 years) birth rates and minimum wages over the period from 1995-2017. The minimum wage is measured as the ratio to the state-level median (hourly) wage. Using a difference-in-differences approach, he finds that:
...increases in minimum wages are associated with reductions in teen birth rates. Using one-year lagged minimum wages, I find that a $1 increase in the effective minimum wage reduces state teen birth rates by 3.43 percent (p<0.05). While slightly smaller in magnitude, the negative and statistically significant effect remains when including state-specific time trends.
Interestingly, the effect is similar but smaller for women aged 20-24 years, and smaller again for each five-year age group above that (becoming statistically insignificant for women aged 40-44). Also interesting is that the effect is only statistically significant for states that have an earned income tax credit (EITC).
Lenhart doesn't really explore this latter finding too much, but I think he should have. It's not clear to me that is helps us understand the mechanisms through which this change occurs. EITCs increase employment and income, while minimum wages increase income (for some), but reduce employment (at least, that's still my overall conclusion on the evidence in the long-running minimum wage debate). If a higher minimum wage leads to lower teenage pregnancy, but only in states with an EITC, then it is tempting to say that this is all a result of higher income. However, in the U.S., I believe that the EITC is only paid to working parents. So, the higher income as a result of the EITC only occurs in the case of having a child, so if teenagers are having less children, then they won't benefit from the EITC. A higher minimum wage reducing teenage birth rates only in states that have an EITC doesn't make a whole lot of sense to me. Unless I'm really not understanding this.
Clearly, there is more work to do on this topic. It isn't as clear as the effect of minimum wages and EITCs on criminal recidivism.
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