Using Regional Variation in Wages to Measure the Effects of the Federal Minimum Wage

Abstract

The imposition of a national minimum wage standard provides a natural experiment in which the “treatment effect” varies across states depending on the fraction of workers initially earning less than the new minimum. The author exploits this fact to evaluate the effect of the April 1990 increase in the federal minimum wage on teenagers' wages, employment, and school enrollment. Comparisons of grouped and individual state data confirm that the rise in the minimum wage increased teenagers' wages. There is no evidence of corresponding losses in teenage employment or changes in teenage school enrollment.