The Effect of Minimum Wages on US Unemployment Rates: An Econometric Analysis

• Main Authors: Yi-Hsuan Sung, 宋宜璇
• Other Authors: David Kleykamp
• Format: Others
• Language: en_US
• Published: 2016
• Online Access: http://ndltd.ncl.edu.tw/handle/jpy93n

碩士 === 淡江大學 === 臺灣與亞太研究全英語碩士學位學程 === 104 === The effect of minimum wage on the US youth unemployment rate has been a controversial issue since 1940s. The reason we chose this topic because of it has attracted considerable attention recently in the world. Many groups see the minimum wage as a ready tool for improving living and equalizing the distribution of income. From the literal review we may understand the trend towards acceptance of a minimum wage has been diversity. David Card and Alan Krueger claimed that if government increases the minimum wage, the unemployment displacement effect is very small. But from other articles, some of economists cannot agree with them. From this point view, we decided to look into the effect of minimum wage on the Untied States. In the empirical analysis chapter, first of all, we used cointegration regression to analyses the long run relations between the federal minimum wage and youth unemployment rate. Secondly, we tried to use error correction mechanisms to understand the short run relations of these two major issues. In the empirical analysis and finding, we find a significant long run and short run relation between youth unemployment rate and federal minimum wage. However, raising the minimum wage has been a controversial issue for more then half century, and we may understand that if the Untied States government increases the minimum wage to $15 per hour (many states already did in 2015), then it may cost up to 400,000 young unemployment workers in the society.