Bridging or Widening Gaps? Minimum Wage Effects on Early Labor Market Outcomes among Low-Income Youth

• In Event: Poverty, Policies, and Program Participation's Relationship to Child and Adolescent Well-being

Abstract

Introduction: The transition into the labor market is a critical phase shaping long-term employment trajectories, yet low-income youth face persistent barriers to stable employment. Early experiences of unemployment or precarious work can generate lasting "scarring" effects, reinforcing inequality. Minimum wage policy is widely debated as a tool to improve labor market outcomes, but its effects on youth remain contested, with mixed evidence on employment impacts. This study examines the role of Seattle’s minimum wage increases in shaping inequality in early labor market outcomes among low-income youth, focusing on labor market entry and early employment outcomes relative to non-low-income youth.
Methods: We use a quasi-experimental difference-in-differences design to estimate the causal effects of Seattle’s minimum wage increases on labor market entry and early labor market outcomes, comparing pre- and post-policy changes between Seattle and non-Seattle areas. The analysis draws on the Washington Merged Longitudinal Administrative Data (WMLAD), a dataset developed to evaluate the Seattle minimum wage ordinance. The sample includes young workers aged 16-24, with low-income status defined based on prior participation in means-tested programs (e.g., SNAP or Medicaid). First, we estimate the effects of minimum wage increases on employment entry among low-income youth using an event-study difference-in-differences approach. Second, we examine the policy’s effects on early labor market outcomes - including hours worked, earnings, employment retention, and short-term trajectories - among first-time entrants. Using a triple-differences design, we examine differential changes across time (pre- and post-policy), treatment status (Seattle vs. non-Seattle), and income status (low-income vs. non-low-income).
Results: Minimum wage increases are associated with a modest rise in entry rates among low-income youth; however, this appears to be driven largely by a decline in the size of the low-income population rather than direct policy effects on employment entry. Entry incidence shows small increases (approximately 1–2 percentage points) in some post-policy periods in Seattle relative to non-Seattle areas. Among low-income youth at the point of first labor market entry, we find no statistically significant changes in hours worked in Seattle following the policy. However, earnings increase substantially at entry, and these gains are larger relative to non-low-income youth, suggesting a widening gap in earnings at the point of entry. Examining short-term trajectories over the first year after entry, low-income youth in Seattle experience initial increases in hours worked and earnings during the first two quarters relative to non-low-income youth. However, these gains are not sustained: declines in employment retention in later periods lead to reductions in average hours and earnings over time. Together, these patterns suggest that while earnings improve at entry, limited employment stability may offset these gains in the short term.
Conclusion: These findings suggest that Seattle’s minimum wage increases may raise earnings at labor market entry for low-income youth but do not improve employment stability. Although initial gains in earnings are observed, declines in retention lead to reductions in average hours and earnings over time. As a result, the policy may have limited effects on reducing inequality, with some evidence of widening disparities relative to non-low-income youth.

Author

• Hanna Cho, University of Washington
  Presenting Author