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Do some workers have minimum wage careers?
May, 2001, Vol. 124, No. 5
William J. Carrington and Bruce C. Fallick
Most minimum wage research has focused on teens and
young adults be-
cause those groups are most likely to work at minimum wage jobs.1 This emphasis on young workers is appropriate to the extent that the effects of minimum wages, whatever they may be, are transitory because young workers soon age and move into higher wage jobs. Yet, there is evidence that some older workers who have finished school and have worked in the job market for some time are still earning minimum wages.2 This article explores whether some workers spend a significant portion of their post-teen, post-school years in—or earn a significant portion of their earnings from—minimum wage jobs. In other words, do some workers have "minimum wage careers"?
There is already a short literature on the amount of time workers spend in minimum wage jobs. For example, a study by Ralph E. Smith and Bruce Vavrichek examined the 1-year earnings mobility of workers that initially worked at minimum wage jobs.3 They found that 63 percent of the minimum-wage workers in their sample were employed at higher-than-minimum wage jobs 1 year later. Also, Bradley R. Schiller found that "only 15 percent of the 1980 entrants still had any (minimum wage) experience after three years, "which suggests that long-term minimum wage employment is rare.4 More than three-quarters of Schiller’s sample were still attending school while working at their first job, however, and relatively few of the sample workers had embarked on their post-school career.5
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1 Most research in this area has addressed the effects of the minimum wage on employment. Research on other effects of the minimum wage include work on schooling decisions. See Ronald Ehrenberg and Alan Marcus, "Minimum Wages and Teenagers Enrollment-Employment Outcomes: A Multinomial Logit Model," Journal of Human Resources, vol. 17, 1982; Janet Currie and Bruce Fallick, "Minimum Wage Legislation and the Educational Outcomes of Youths: A Re-examination," manuscript (Los Angeles, CA, UCLA, June 1991); David Neumark and William Wascher, "Minimum Wage Effects on Employment and School Enrollment: Evidence from Policy Variation in Schooling Quality and Compulsory Schooling Laws," Federal Reserve Board, Working Paper no. 133, June 1993. For the effects of minimum wage on on-the-job training, see Masanori Hashimoto "Minimum Wage Effects on Training on the Job," American Economic Review, vol. 72, no. 5, December 1982, pp. 1070–87. Regarding crime, see George A. Chressanthis and Paul W. Grimes, "Criminal Behavior and Youth in the Labour Market: The Case of the Pernicious Minimum Wage," Applied Economics, vol. 22, 1990, pp.1495–1508.
Studies on the major intended benefit, changing the distribution of income in favor of low-income households include: Jere Behrman, Robin Sickles, and Paul Taubman, "The Impact of Minimum Wages on the Distribution of Earnings for Major Race-Sex Groups: A Dynamic Analysis," American Economic Review, September 1983; Richard V. Burkhauser and T. Aldrich Finegan, "The Minimum Wage and the Poor: The End of a Relationship," Journal of Policy Analysis and Management, Winter 1989, pp. 53–71; William R. Johnson and Edgar K. Browning, "The Distributional and Efficiency Effects of Increasing the Minimum Wage: A Simulation," American Economic Review, March 1983; Linda R. Martin and Demettrios Giannaros, "Would a higher minimum wage help poor families headed by women?" Monthly Labor Review, August 1990, pp. 33–7; Ralph E. Smith and Bruce Vavrichek, "The minimum wage: its relation to incomes and poverty," Monthly Labor Review, June 1987, pp. 24–30; and Gary W. Loveman and Chris Tilly, "Good Jobs or Bad Jobs? Evaluating the American Job Creation Experience," International Labour Review, vol. 127, no. 5, 1988, pp. 593–611.
2 See David Card and Alan Krueger, Myth and Measurement: the New Economics of the Minimum Wage (Princeton, NJ, Princeton University Press, 1995). Card and Krueger estimate that more than half the workers affected by the April 1990 minimum wage increase were over the age of 24. This and other facts suggest that some workers might be affected by the minimum wage well into their careers.
3 Ralph E. Smith and Bruce Vavrichek, "The Wage Mobility of Minimum Wage Workers," Industrial and Labor Relations Review, October 1992, pp. 82–88.
4 Bradley R. Schiller, "Moving Up: The Training and Wage Gains of Minimum-Wage Entrants," Social Science Quarterly, September 1994, pp. 622–36.
5 Recognizing the apparent differences between this group and the members of the sample who were no longer in school in 1980, parts of Schiller’s analysis treats the two groups separately. See Schiller, "Moving Up: The Training and Wage Gains."
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