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Study Finds Lower Minimum Wage for Teens Would Substantially Increase Jobs

March 5, 1987

CHICAGO (AP) _ Teen-agers would be able to find many more jobs if the minimum wage was lowered, a new Federal Reserve study concludes.

This is contrary to earlier research that indicated only minor employment gains would result from cuts in the minimum wage for young people.

The new study, released this week, says pegging the minimum wage for teen- agers 25 percent below that of adults would increase the employment rate for teens to 58 percent from 43 percent over a period of several years.

The study by economist Donna C. Vandenbrink used census data from 1980 and a then-current minimum wage of $3.10 an hour. Also, the research was limited to data from states in the Seventh Federal Reserve District: Illinois, Indiana, Iowa, Michigan and Wisconsin.

The basic findings, however, would probably hold for the rest of the nation, said Herbert Baer, a Fed economist who helped with the study.

The improvement in employment opportunities was as great for whites as for blacks and for suburbanites as for city dwellers, Ms. Vandenbrink said.

″Thus,″ she said, ″a youth differential would not appear to benefit primarily blacks or primarily center city youth. Its benefits would be felt across all racial groups and geographic areas.″

The researcher pointed out that her findings differed from a congressional study in 1980 which indicated that youth employment would increase by 5 percent, at most, with a 25 percent cut in the minimum wage.

Baer said Wednesday the two studies depended on strikingly different methodology and it’s ″a tough question″ which could be considered more valid.

″Neither study can be viewed as conclusive,″ he said, because no one can predict with 100 percent accuracy how many jobs might be offered and how many teens might seek work rather than do something else with their time.

Nonetheless, he said, Ms. Vandenbrink’s study adds valuable insights.

It concludes that lowering the minimum wage ″would draw new teen workers from outside the labor force as well as from the unemployed, from all racial groups and from all geographic locations.″

The job improvements would occur over several years as labor markets adjusted to the increased availability of low-skilled labor.

The study analyzed two alternatives, one with a 25 percent cut for teens in the minimum wage and one with a 15 percent reduction.

It concluded that a 25 percent cut would yield a 30 percent to 36 percent increase in employment, while a 15 percent reduction would increase employment by 18 to 21 percent.

The study was based on an analysis of census data and other studies that included direct questioning of teens on their employability.

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