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UNITED STATES DEPARTMENT OF LABOR

Minimum wages and restaurant employment for teens and adults in metropolitan and nonmetropolitan areas (Winters, 2022)

Review Guidelines

Causal Evidence Guidelines

Absence of conflict of interest. 

Citation

Winters, J. V. (2022). Minimum wages and restaurant employment for teens and adults in metropolitan and nonmetropolitan areas. Journal of the Agricultural and Applied Economics Association, 1(3), 254–269. https://doi.org/10.1002/jaa2.25

Highlights

  • The study’s objective was to examine the relationship between minimum wage changes and employment in the restaurant industry for teens ages 16–17 and adults ages 23–59 with education less than an associate’s degree.
  • The author used a two-way fixed effects regression model to estimate the relationship between minimum wage changes and employment in the restaurant industry, using individual‐level employment data from the Current Population Survey (CPS) from 2005–2019. 
  • The study found a statistically significant negative relationship between a higher minimum wage and teen restaurant employment.
  • The quality of causal evidence presented in this study is moderate because it was based on a well-implemented non-experimental design. This means we are somewhat confident that the estimated effects are attributable to the minimum wage laws, but other factors might also have contributed. 

Intervention Examined

Minimum Wage

Features of the Intervention

In addition to the federal minimum wage, states, cities, and other localities can set their own minimum wage. Numerous localities raised their minimum wage throughout the study period. 

Features of the Study

The author used a two-way fixed effects regression model and panel data to estimate the effects of the minimum wage on employment in the restaurant industry. The study included workers aged 16-17 and 23-59 in the Integrated Public Use Microdata Series (IPUMS) from the Current Population Survey (CPS), across all states from 2005-2019, for a total of 662,997 observations. The author obtained minimum wage data for states and substate areas and then standardized the wages across the study period using the Consumer Price Index. The author’s regression models included CPS survey weights and clustered standard errors by state. 

Findings

Employment 

  • The study found that a 10% increase in the minimum wage is associated with a 5.23% decrease in the probability of teen employment. This finding was statistically significant.

Considerations for Interpreting the Findings

The authors performed multiple robustness checks that included adding area-specific linear time trends, using Census division-time fixed effects instead of region-time fixed effects, excluding time-varying area controls, excluding substate explanatory controls and only using state‐level variation, including controls for adult median wages in the local area, and limiting the sample to 2010-2019 to avoid the Great Recession. The direction and statistical significance of findings on teen employment remained unchanged. The authors note that results for adults, which showed that an increase in minimum wage was associated with an increase in employment, are potentially affected by selection bias due to migration.

Causal Evidence Rating

The quality of causal evidence presented in this report is moderate because it was based on a well-implemented non-experimental design. This means we are somewhat confident that the estimated effects are attributable to the minimum wage increases, but other factors might also have contributed. 

Reviewed by CLEAR

January 2024