Sunday, 28 September 2025

Minimum wages and student summer employment

The research literature is starting to coalesce around minimum wages have small disemployment effects, consistent with the standard demand-and-supply model (see the meta-analysis in this post, or the links at the end of this post, for more details). To add to that evidence, this recent article by Adam Wright, Darius Martin, and John Krieg (all Western Washington University), published in the journal Contemporary Economic Policy (), looks at the impact on student summer employment. Specifically, Wright et al. use data from Washington state, and focus on students enrolled in Western Washington University in Bellingham, which has about 15,000 undergraduate students.

Wright et al. match student data from 2013 to 2019 to employment records from the Washington State Employment Security Division (ESD) from 2009 to 2019. The ESD data includes both earnings and hours worked, but only for employers that pay into the state's unemployment insurance programme. This excludes workers for the federal government and the self-employed, who are unlikely to be students. However, it also excludes students "students working under financial assistance programs provided by the school", so Wright et al. supplement the ESD data with data on student employees at WWU. Because the employment data starts before the student data, Wright et al. can control for past work experience. And because the data are quarterly, they are able to look separately at employment effects over summer, and during term time.

There are over 31,000 students in the analysis sample, and nearly 260,000 student-by-quarter observations. Wright et al. apply a fairly straightforward panel regression model, controlling for work experience and for the unemployment rate of Whatcom County (where the WWU campus is located). They look at three outcome variables: (1) hours worked; (2) wage income; and (3) a binary variable indicating whether a student worked any hours at all. The overall effects of the minimum wage are not statistically significant. However, when looking at the results by season, Wright et al. find that:

In summer, when students are most likely to work, higher minimum wages significantly predict reduced work hours and the probability of employment, whereas the relationship with income is negative but imprecisely measured. In particular, the coefficient estimates imply that a 100% increase in the minimum wage is associated with 90.08 fewer hours worked in the summer and a reduction in the probability of work by 34.2% points. This suggests that the 16% minimum wage increase experienced in 2016–2017 was linked to a 14.4 h decrease in summer hours worked (an 8.5% decrease relative to the average) and a 5.5% point decrease in summer employment (an 8% decrease)... Minimum wage policy does not appear to predict disemployment in non-summer quarters, leading wage income to rise with increasing minimum wages in winter and spring...

So, minimum wages reduce student summer employment. It is unclear why Wright et al. decided to illustrate the size of the effect with a 100% change in the minimum wage (although that is what the coefficient in the table represents), since that size of change is never observed in the data. It is better to say that a 10% increase in the minimum wage would reduce hours worked in summer by about nine hours (compared with a mean of 170 hours of work in the summer quarter). It's a small effect, but not zero. And since student summer employment tends to be concentrated in low-wage industries like retail or hospitality, that makes sense. Turning to the effect of previous work experience, Wright et al. find that:

...higher wage income in winter and spring quarters when minimum wages increase only holds for students with prior work experience. However, there is statistically significant drop in employment in summer for both students with and without work experience. We estimate that a 100% minimum wage increase for workers with no pre‐matriculation work experience is associated with 115 fewer hours of work and a 38.8% point decrease in the probability of employment during the summer quarter. These estimates imply that the 16% minimum wage increase in 2017 corresponded with inexperienced students working 18.1 fewer hours and being 12.8% points less likely to be employed in the summer. These results are attenuated for those who entered WWU with work experience: a 100% minimum wage increase corresponds to 21.4% point reduction in summer employment for this group whereas the relationship between minimum wages and hours worked is negative but statistically insignificant.

The key finding is that students with no prior work experience and more negatively affected by the minimum wage increase than students with prior work experience. This is to be expected, since employers facing a higher minimum wage would be likely to concentrate employment in more experienced (and more productive) workers, even within summer student workers.

Next, comparing the effects between students who are local to Whatcom County and those who are not, Wright et al. find that:

...the negative relationship between minimum wages and summer employment only occurs for non‐locals, with estimates comparable to those experienced by students with no prior pre‐matriculation work history... Taken together, the full sample and quarterly results indicate that those with higher search costs may be more negatively impacted by minimum wage changes.

The mention of search costs here is important. In a search model of the labour market, workers face a search cost, made up of the time and effort spent looking for a job. Locals face lower search costs, because they likely have networks of local acquaintances and friends who can more easily help them find work, compared with non-locals. These results show that, in the context of higher minimum wages, those differences in search costs really matter.

Wright et al. are careful to point out that their results are correlations rather than causal. Specifically, their analysis lacks a control group. Nevertheless, it provides some descriptive evidence that is consistent with the emerging consensus of small but significant disemployment effects of the minimum wage. However, it would be interesting to see whether these results stood up to a more careful analysis using methods designed to elicit causal impacts. Nevertheless, Wright et al. conclude that:

Our results suggest that minimum wages particularly hurt inexperienced workers in summer, the quarter in which students tend to work most.

As someone who teaches students who rely on summer employment to build up reserves that they can draw on during term time, these results, even if they are not definitively causal, are a worry.

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