Effects of Minimum WageBy: Jon Klem, Pete Krusing,& Seth Lillenberg

History of Minimum Wages

•Fair Labor Standards Act 1938

▫Originally, 25 cents/hour

▫Currently at $7.25/hour Though some variation in minimum wage

among state exists▫Ultimately, minimum wage has remained

around 40-50% of the national average manufacturing wage

Effects on employment

•Allows employers to be selective

•Job training is reduced with increased wages

•“A loss of opportunity for the hardcore unemployed” –Jacob Mincer

•When wages increase, unemployment increases

Effect on teenagers

Studies on Minimum Wage

•New Jersey (1990)▫Concluded that raising the minimum wage

has a negligible effect on short-term employment

•Canada ▫Concluded that raising the minimum wage

has a tremendous effect on long-term unemployment

Who benefits from minimum wage increases?

•Upper-middle class teenagers

•Unions