Disappearing Teen Jobs and the Minimum Wage, Part 2

Is there really a connection between the rise of the minimum wage and the disappearance of teen jobs from the U.S. workforce over time?

Having now set the stage for our analysis, our first step will be to essentially duplicate The Big Picture’s Invictus’ analysis, so that we can determine how much of a correlation might exist between the two things. Our first chart presents the BLS’ data for the Employment-to-Population Ratio for individuals between the ages of 16 and 19. Although Invictus is mainly concerned with the period from 1997 onward, we’ll go back to 1980 so we can pick up any previous trends:

Note: In the chart above, we’ve indicated the NBER’s official periods of recession in the chart with the red-shaded vertical bands.

What we see in reviewing the chart is that there seems to be a fairly clear break in the overall trend in the teen employment-to-population ratio. Before 2002, we find this ratio was consistently above 40%, but that after 2002, it has fallen below this level.

Beyond that, we find that the teen employment to population ratio tends to fall during periods of recession, which is something we should expect.

In our next chart, we’ll look at the mirror image of this chart – the teen non-employed to population ratio, which shows the percentage of the U.S. teen population who are not employed:

The reason why we’re considering this chart is because it will make a visual comparison between the rising minimum wage over time and the change in the ratio of non-employed teens to the overall teen population of the U.S. easier to see.

Speaking of the rising minimum wage over time, here is the level of the federal minimum wage from 1980 through 2011:

Now, let’s overlay these last two charts together and see what we can see!

In the chart above, we adjusted with the scale of the vertical axis for the U.S. Age 16-19 Non-Employed to Population Ratio so that it would fairly closely match up with the period from 1997 through 2000 (the beginning of Invictus’ main period of interest) while aligning the major horizontal gridlines of both vertical axes.

Examining the chart from 1997 onward, we see that there appears to be very little correlation between the increase in the non-employed portion of the U.S. teen population and the federal minimum wage, although the period from 2007 through 2009 does appear to have some correlation, although this might be due to the recession that corresponds to these years as well.

So at first glance, it would appear that Invictus is correct and the editorial writers of the Wall Street Journal are wrong on the effect of the minimum wage on teen employment levels.

However, that’s only at first glance. We can’t help but notice that Invictus’ analysis is superficial at best and is really fundamentally flawed, because he appears to have a California-size hole in his analysis. We’ll address that problem and what the real connection between disappearing teen jobs and rising minimum wages looks like in the next post of this series.

Previously on Political Calculations

• Disappearing Teen Jobs and the Minimum Wage, Part 1

Data Sources

U.S. Department of Labor. Wage and Hour Division. History of Federal Minimum Wage Rates Under the Fair Labor Standards Act, 1938-2009.

U.S. Bureau of Labor Statistics. (Seas) Employment-Population Ratio – 16-19 yrs. Employment-population ratio. Age: 16 to 19 years. BLS Data Series LNS12300012.

Read more at Political Calculations