Disaggregating Minimum Wage Impacts: How Do Young Workers Fare?

Background and Purpose: One in twelve American workers is now covered by a city-level minimum wage. Research on city minimum wage laws is still at an early stage, however, and most studies of outcomes for workers have focused on the workforce or population as a whole. Yet, minimum wage laws likely vary in their effects on workers across demographic groups. Early studies of Seattle’s minimum wage increases, enacted in 2015, showed gains only for experienced workers (Jardim et al 2022). Many less experienced workers are young persons. Early labor market experiences set the stage for career progression. Understanding how local minimum wage laws affect these workers’ labor force entry would provide crucial insight into their economic and social trajectories. We use the case of Seattle’s minimum wage increases to ask the following research questions:

• How did Seattle’s minimum wage increases affect young residents’ wage progression, earnings progression, and employment consistency?

• How did these effects vary by industry and across workers of different ages, ethnoracial identities, and binary sex?

Methods: We use Washington Merged Longitudinal Administrative Data (WMLAD), a unique and powerful resource developed specifically to examine the impact of the Seattle minimum wage ordinance. WMLAD data contain close to a full population, allowing for intersectional analysis of groups defined by combinations of age, sex, and ethnoracial identity as well as other factors. From WMLAD, we construct a cohort of young workers who were employed in the quarter prior to the first minimum wage increase in Seattle (the first quarter of 2015). Treated workers are those who were employed in Seattle at baseline. We use a combination of nearest-neighbor and exact matching to create a comparison group. Triple difference models allow us to estimate a causal relationship between the Seattle minimum wage increases and employment outcomes for young workers. Sub-group analyses and marginal effects by demographic characteristics will allow us to estimate differences in the minimum wage’s effect by ethnoracial identity, age, and binary sex.

Results: Preliminary triple-difference analysis results show that there is no statistically significant difference in earnings among young workers in Seattle compared to those outside of Seattle. However, quarterly hours worked among Seattle workers are statistically significantly lower than among their counterparts outside of Seattle. This suggests that young workers subjected to a higher minimum wage were able to work less to earn more. Further sub-group and marginal effect analyses will allow us to identify whether higher minimum wages had differential impacts on different populations of young workers.

Conclusions and Implications:

Why do young workers’ employment and earnings matter? Finding that minimum wage laws reduce employment or earnings for younger workers would raise concerns about longer-term scarring effects. On the other hand, if minimum wage laws increase employment, this finding would suggest that longer-run positive impacts of the minimum wage ordinance may exceed short-run gains.