Minimum Wages and the Demand for Labor

Daniel S. Hamermesh

NBER Working Paper No. 656 (Also Reprint No. r0325)
Issued in April 1981
NBER Program(s):Labor Studies

I formulate measures of the effective minimum wage, based on broad definitions of the labor costs that face employers, and use these measures in reestimating some simple equations relating the relative employment of youths and adults to the U.S. minimum wage using aggregate data for 1954-78.I then ground the model more closely in the theory of factor demand, first by adding the relative wages of youths and adults to the equation describing their relative employment, and then by specifying a complete system of demand equations for these two types of labor. Teen employment responds quite robustly to changes in the effective minimum in these specifications, with an elasticity of -0.1. A translog cost function defined over young workers, adults, and capital shows that the effective minimum wage reduces employers' ability to substitute other factors for young workers. Using both sets of results, I find that a subminimum wage for youths would have increased their employment with at most a small loss of jobs among adults.

download in pdf format
   (274 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w0656

Published: Hamermesh, Daniel S. "Minimum Wages and the Demand for Labor," Economic Inquiry, Vol. XX, No. 3 (July 1982), pp. 365-380. citation courtesy of

Users who downloaded this paper also downloaded* these:
Brown, Gilroy, and Kohen w0846 The Effect of the Minimum Wage on Employment and Unemployment: A Survey
Neumark and Wascher w12663 Minimum Wages and Employment: A Review of Evidence from the New Minimum Wage Research
Hamermesh w1297 The Demand for Labor in the Long Run
Brown, Gilroy, and Kohen w0790 Time-Series Evidence of the Effect of the Minimum Wage on Youth Employment and Unemployment
Neumark and Wascher w4617 Minimum Wage Effects and Low-Wage Labor Markets: A Disequilibrium Approach
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us