TEENAGERS AND THE MINIMUM WAGE: POSSIBLE EFFECTS OF ELIMINATION OF COVERAGE OR CREATION OF A LOWER TIER BASED ON AGE

The market equilibrium model predicts that the supply and demand schedules of labor to an industry will cross at a level at which labor receives the value of its marginal product as contributed to the output produced. The imposition of an effective minimum wage in that industry creates a price floor for labor which will reduce employment as it promotes incentives to substitute capital for labor and/or workers with higher marginal productivity for those with lower skill and lower marginal productivity. This means in effect that it will lead employers to eliminate less productive jobs. Teenagers (youths 16–19 years old) with little training or work‐experience may be priced out of the market because they are not “worth” (in terms of productivity) the minimum wage.