The Effects of Local, State, and Federal Minimum Wage on Employment Growth among Teenagers in the Restaurant Industry

Abstract

Over the last twenty years, local municipalities have been implementing minimum wage ordinances at an accelerated rate. These local changes, along with state and federal minimum wage increases, are included in the examination of the impact of minimum wage hikes on employment growth of teenagers in the food services and drinking places subsector. While most minimum wage research focuses on employment levels, recent contributions highlight the importance of analyzing employment growth. This study follows the new approach aforementioned, focusing on teenagers within the restaurant industry to test for the impact of minimum wages on inexperienced workers. Using a distributed-lag model, the results show that an increase in a minimum wage reduces employment growth for teenagers within this subsector. The findings suggest that the effects of minimum wages within this demographic are most strongly felt in the first three years following an increase in minimum wage. Specifically, the results show that a 10% increase in a minimum wage decreases the employment growth rate by approximately 2.27% over a period of three years.

Keywords: Minimum wage, employment growth, city ordinances, earnings

JEL Classification: J31, J38, J63, H73