The Impact of Minimum Wages on Teenagers’ Educational Plans
- Silke Anger, Head of the Research Department “Education, Training, and Employment Over the Life Course” at the Institute for Employment Research (IAB); Professor of Economics of Education at the University of Bamberg; IZA research fellow
This paper studies the impact of the minimum wage on teenagers’ educational investment behavior. We exploit the introduction of the German statutory minimum wage law in 2015 and the regional variation in the bite to analyze causal effects of minimum wages on educational plans of teenagers with different skill levels. Using detailed survey data in a difference-in-differences design, we find that in highly affected regions, teenagers aim for a higher educational degree after the minimum wage introduction despite their exemption from the law. This effect is driven by educational intentions of low-skilled teenagers who are most likely affected by the minimum wage when entering the labor market. In contrast, in hardly affected regions the minimum wage did not alter expected wage or employment prospects of teenagers and hence did not affect their educational plans. We conclude that low-skilled
teenagers consider regional labor market conditions in their schooling decision and intend to compensate for lower employment prospects by increasing investments in human capital.
Keywords: minimum wage, educational intentions, employment prospects
JEL-Codes: J24, J31, I21
- Saverio Minardi, PhD student in Sociology and Social Research
- Mostafa Goudarzi, PhD student in Economics and Management
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