August 28, 2012

Teenage Labor Participation versus Minimum Wage

The other day I wrote about how we've seen a 2% drop in the labor force participation rate.   One group that dropped significantly was teenagers age 16-19 years old.   PK commented in reply to that article and suggested I take a look at the teenager labor force participation rate as it relates to the minimum wage rate. 

Historical lookup table for the Table A-1. Employment status of the civilian population by sex and age
I found the history of minimum wage rates at The Digerati Life.

Lets look at how the two relate over the past 50 years : 

(click image for full size)


Looking at that chart I don't see any kind of consistent correlation between the labor force participation rate of teenagers versus the minimum wage.

During the 60's and 70's both the labor force participation rate and the minimum wage were on steady upward slopes.   Then in the 80's and 90's the labor force mostly flattened out with some bumps up and down.   Yet the minimum wage was flat most of the 80's and 90's but there were a couple increases.   In the 21st century the labor force rate has been declining steadily while the minimum wage has been flat then up then flat again.

Part of the time they are going in different directions and other times they go in the same direction.   Its not at all consistent.   I don't see any real relationship between the two values.

We just went through a major recession so I wondered if the teenage labor force participation rate was impacted by recessions in general.    The average change in labor force participation during years we had recessions was -0.7%.    For other years the average change was 0.0%.  

Lets plot the recession years on the graph of teenager labor force participation.


This looks more like  a trend to me.   During the 60's and 70's the labor participation for teenagers was going up steadily but flattened during the recessions.   Then in the 80's and 90's the participation rate dropped along with the recessions but was inching up otherwise.    In the 2000's the rate has been dropping and it dropped the fastest during the most recent recession.

Bottom Line :  I don't see any real correlation between teenager labor force participation rates and changes in the minimum wage rates.    I do think there is some direct impact on teenager labor force rates and slowed economy during recessions.

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5 comments:

  1. I don't think there is a correlation either. It seems the teenage labor participation rate is low because of the high unemployment rate. How about the comparison. :)

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  2. Thanks for following up on that one... let me take a swing at it as well, one factor I'll probably toss in is inflation (I'm eyeing the 1970s).

    It's probably close to impossible to perfect the technique without an army of graduate assistants, however - consider that if a big state (like... California?) does something it's a lot of the teenage labor force.

    Here's Ironman at Political Calculation's effort from the other day. He had a few on the teenage employment rate sans California for a while back, but I think we can get something good out of these stats yet.

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  3. BTW, you have the hardest captchas haha. I just failed twice. Maybe I'm a robot?

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  4. Joe : Yes unemployment is likely to have an impact.

    PK : I had thought of adjusting minimum wage for inflation and seeing what that looked like. But I figured you can see the trends when minimum wage is either flat or goes up. I don't know if inflation itself would impact labor participation.

    I'll look at teenage labor participation vs unemployment & inflation in an upcoming post.

    I suspect there are various things impacting it and it may be hard to root out the impact from one variable without considering the others.


    The longer term trends from 1980 to today is a decrease in participation. I would not expect a 3 decade long trend like that to be based on short term economic cycles or occasional changes in minimum wage. It probably has a broader societal change or demographic shift at the root.

    I would bet college enrollment might impact this. The data for teens age 16-19 overlaps college students.

    I would also wonder what % of teens leave home at age 18. That might be a factor that has changed over the past 50 years which would also then impact workforce participation.

    I wonder if I could objectively measure the qualify of video games and see how that relates to teen labor participation. ;-)

    Jim

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    Replies
    1. We're getting dangerously close to my day job here (and I know you're joking), but it would be hilarious to do something like "maximum triangles rendered/second by video card" vs the unemployment rate. You would win one internet, for sure! You'd probably give that pirates vs. global temperature anomaly graph a run for its money in hilarity.

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