Of course cross sectional data can reflect many factors, so let's look at time series data. W. Peden directed me to a post by
Britmouse,
which discusses a
major mystery that has puzzled the British
government, particularly the commission that is engaged in determining
the minimum wage rate. Apparently
the rate of unemployment for 16 and
17 year olds has been rising sharply for nearly a decade. The
commission noticed that the rise began well before the recent recession,
indeed teen unemployment was rising even as the unemployment rate for
adults was falling during the pre-recession boom. Britmouse has a graph
that nicely illustrates the mystery:
Britmouse is also confused by this mystery, as you can see from this quotation:
It's "difficult to explain"... right. A total mystery. I can't think what might have caused
it, so let's blame immigrants and old people, those are surely the most
"significant developments" in the British labour market in the years to
2008. If anybody does have any better ideas about what happened, be sure to write to Card, Krueger, Dube, etc.
Just to be clear, I am not at all convinced that minimum wage laws are
the only factor involved here. But it's interesting how many people
don't seem to be willing to even consider the possibility.
Didn't youth
unemployment rise more relative to adult unemployment in the US during
the recent recession, as compared to 1981-82? And didn't we increase
the minimum wage by nearly 40% just as we were sliding into the biggest
slump in NGDP since the 1930s? And didn't President Obama just call for
another large increase in the minimum wage, on top of that 40% boost?
And then didn't President Obama change his mind and decide against the
large increase in the minimum wage that he had proposed, suggesting
instead that his proposed increase was too small, and that it should be
even larger? And didn't that proposal get criticized by conservatives
in California, who said no, the increase should be still larger?
After all, if we make it high enough the Mexicans won't be able to
find jobs here. And so we come full circle, back the FDR's New Deal,
and the very first minimum wage laws of the 1930s. Which groups were
those laws supposed to exclude?"
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