Teen Unemployment: Minimum Wage and Contributing Factors
DOI:
https://doi.org/10.58445/rars.3228Keywords:
youth unemployment minimum wage labor panel regression, youth unemployment, minimum wage labor, panel regressionAbstract
This study examines the impact of state minimum wage, macroeconomic indicators, and sectoral employment shares on teen unemployment across six U.S. states from 1999 to 2019, using panel regression models with fixed and random effects and holding one state out for out-of-sample validation. The analysis isolates key drivers of youth labor outcomes while controlling time-invariant and unobserved characteristics within states, such as geography and cultural norms. The fixed effects model demonstrates stronger explanatory power (R² = 0.660) than the random effects model. The results show that GDP growth, rising household income, and increased employment in leisure and retail sectors significantly reduce teen unemployment. By contrast, minimum wage thresholds above $8 are associated with higher teen unemployment rates. These findings suggest that targeted policies, such as youth wage exemptions or specific sector training subsidies, rather than uniform mandates, can better support teen labor force participation while minimizing adverse effects.
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