Do Minimum Wages Reduce Employment? A Case Study of California, 1987–89

In July 1988, California's minimum wage rose from $3.35 to $4.25. During the previous year, 11% of workers in the state and 50% of California teenagers had earned less than the new state minimum. Using published data and samples from the Current Population Survey, the author compares changes in the labor market outcomes of California workers to the corresponding changes in a group of states with no increase in the minimum wage. The minimum wage increase raised the earnings of low-wage workers by 5–10%. Contrary to conventional predictions, however, there was no decline in teenage employment, or any relative loss of jobs in retail trade.