Dr. ADIE. Not exactly. I am saying that if you increase the minimum wage that applies to teenagers now, that there will be some loss in employment. The CHAIRMAN. And you base that on empirical findings of past experience? Dr. ADIE. That's right. The CHAIRMAN. I am just trying to find out what industries you looked at. You had geographical Dr. ADIE. I looked at all the industries in which teenagers are employed. There was no selection made as to industry. In fact, I didn't look primarily at industries, I looked at people, and particularly teenagers. The CHAIRMAN. Well, how many were covered in 1954, teenagers? That was the beginning of your studies, I understand. You can refer to any material. Dr. ADIE. Yes. I was not particularly concerned with the number that was covered versus noncovered, but I was concerned primarily with the effect on teenagers as a group. I think that it is safe to say that all those that were covered, the wages of all those that were covered was affected by the minimum wage. The CHAIRMAN. The decisive figure would be teenager employment in 1954, when, evidently, there was an increase in their minimum wage? And compare that with 1955, 1956, in terms of employment of teenagers. That is what I want to have. Dr. ADIE. That is pretty much what I have done. The CHAIRMAN. Well, that is what I want to say. Dr. ADIE. I think that is a fair representation. I think my three papers are in the hands of people that are putting them in the record. The CHAIRMAN. Well, where are they? Nobody here—————— Dr. ADIE. I gave them to you. The CHAIRMAN. Well, let's get them out here. Then we will go on to the others because, frankly, I don't want to be mystified by this business. I want your hard facts, and these broad conclusions are absolutely vaporous, unless you show us total employment of teenagers, 1954. You say "empirically." That means you looked at them; right? Dr. ADIE. That's right. The CHAIRMAN. You looked at statistics, total employment in 1954, total employment, 1955, total employment in 1956 of the people you are talking about, and these are teenage workers; right? Dr. ADIE. Right. The CHAIRMAN. Well, conclusions, frankly, you know, they just go right out the window unless we see those figures. Dr. ADIE. I am not sure Senator TAFT. Let me ask one question. Why did you pick the year 1954 to start with? Dr. ADIE. Well, the data broken down by the different teenage groups; namely, whites, nonwhites, male and female, begins in 1954. Senator TAFT. In other words, it wasn't because there was some new coverage at that point? Dr. ADIE. No; you don't have the breakdown in unemployment rates by different sociological groups before 1954. Senator TAFT. So the first change that came along was in 1956? Dr. ADIE. That's right. Senator TAFT. You already had some minimum wage in effect in 1954. You didn't start with 1954 because there was a change? Dr. ADIE. No; I started with 1954 because that is when the data became available. The CHAIRMAN. Well, I am glad I tried to get that statement, why 1954? Dr. ADIE. Yes; that is the first year the data became available. Dr. ADIE. Well, this testimony of mine is a bit of a summary statement on a number of papers I have done, and in many different-many different studies. I have looked at teenage group as defined, 16 to 19. I have also looked at teenagers as defined from 14 to 19, and unemployment rates on teenagers under the two definitions are available from the BLS. The CHAIRMAN. In this table you presented with your testimony, what age group is included here? Dr. ADIE. Sixteen to nineteen primarily. Dr. ADIE. Yes. Senator TAFT. Or two? Dr. ADIE. Including. The CHAIRMAN. Including 16 and including- The CHAIRMAN. All of the year, age 19? Dr. ADIE. Yes. The CHAIRMAN. That doesn't, of course, register right in on the coverage here, does it? Bob, do you have any Senator TAFT. No; I don't think I have any questions at this point. Obviously, as the Chairman says, it is going to require a good deal of study on our part to make sure we understand what we are dealing with. I hope we can review your materials. The CHAIRMAN. My motion here is frustration, because I am not a statistical thinker. Senator TAFT. Mr. Chairman, let me ask one question here. This is a statement regarding the employment effects of minimum wage rate from a publication by Peterson and Stewart. There is a statement on page 154 that reads as follows: "Weighted evidence in academic literature is that adverse relative employment affects were related to the relative wage impact of legal minimums. Do you Dr. ADIE. Yes. Snator TAFT. Does this statement reflect academic thought on this point? Dr. ADIE. Yes. Senator TAFT. Would you suggest any other witnesses? Dr. ADIE. I don't think the three of us are unrepresentative of our profession. Other people could very well have been brought. I don't think the testimony would have been all that much different. Mr. MITTELMAN. I just have one question, and that is, do any of the three gentlemen's studies, either with respect to an explanation of past increases in teenage unemployment or your predictions as to the effect of changes in the minimum wage take into consideration the effect of demographic changes on the teenage population? We know we have also had a very great increase in the teenage population relative to the rest of the population in the very years under study and that this is changing at this time with lower birth rates in the 1960's, so that presumably around 1976 or so, we will begin to see a change in the relative proportion of the population comprised of teenagers. Dr. MOORE. I did look at that, and if you will refer to table 2 in my article, which I distributed, the first set of figures in table 2 give the effect of adding the proportion of nonwhite teenagers to the total labor force on the unemployment rate. The interesting result of this was that it had no impact, virtually no impact on the coefficient, that is the relationship between minimum wage and unemployment rates. The-it did explain some of the variants in teenage unemployment for this group, but it didn't affect the relationship between the unemployment rate and the minimum wage. Mr. MITTELMAN. Either of you other two gentlemen? STATEMENT OF FINIS R. WELCH, GRADUATE SCHOOL, CITY UNIVERSITY OF NEW YORK, AND NATIONAL BUREAU OF ECONOMIC RESEARCH Dr. WELCH. Just made an adjustment. Certainly the effect of a minimum wage with the rising population is extirpated. Both in my study with Mark Kosters, and in the study that I will refer to in a few minutes by Nori Hashimoto and Jacob Mincer, so surely as the teenage share of the total population declines, the kind of pressures that we saw in 1961, full impact of teenagers on the population coincided with the really extensive increase in coverage, the effect that was extirpated then, certainly Mr. MITTELMAN. Would you say that because of the decline in the relative teenage population that the effect of the increases presently contemplated would be less than they were, let's say, after the 1961 increase? Is that the conclusion you would reach? Dr. WELCH. I think that is a fair statement. Senator TAFT. Might I interrupt, and ask whether you think that is true as to different groups. Specifically I note in a floor statement of Senator Dominick's stating the following, "Since the population growth of white teenagers is expected to decline to 5 percent over the next decade, their unemployment situation may become easier to deal with. No relief is in sight for black youths. Their projected population growth for the remainder of this decade is 44 percent." Dr. WELCH. I am really not familiar with other than the very recent history in terms of birth rates. The black rates have been going down. Senator TAFT. And the teenage rate has been going up. Dr. WELCH. In 16 years this Senator TAFT. I presume the problem is still going to be with us. Dr. WELCH. Even with the teenage share declining, I mean the effects are there. They are extirpated because the rising population share itself places downward pressure on the wage. And with the wage flow, then that is translated into disemployment. The CHAIRMAN. Now, shall we turn to Dr. Welch? You are with the National Bureau of Economic Studies. Were you so associated when you were last here? Dr. WELCH. Yes, sir. I am also with City University of New York, and I was last time as well. The CHAIRMAN. What is the National Bureau of Economic Studies? Dr. WELCH. It is the National Bureau of Economic Research. It is the oldest nonprofit institution in the United States. We do economical research in general of a variety of kinds. In the charter of the bureau we do not get involved directly in policy analysis, and must testify, participate in this way only on our own. The bureau stays independent. The CHAIRMAN. Let me understand that. This is a nonprofit organization? Dr. WELCH. Yes, it is. The CHAIRMAN. That means in context around here, normally, one of the tax-foundation kind of tax-exempt situation? Dr. WELCH. Yes. The CHAIRMAN. That is why, that is one of the reasons why it cannot involve itself in policy in this forum? Dr. WELCH. I think so. Other nonprofit organizations do involve themselves more directly in policy analysis, Brookings Institution, others are more closely related to policy than we are. They are better known for development of national income accounts-want to remove Nobel Prize winners in economics, develop the national income accounts at the National Bureau. And that is the organization. It is housed in New York City with branches at Cambridge, Mass., Yale, Chicago. The CHAIRMAN. When you say you appear on your own, what does that mean? Dr. WELCH. At our own expense, primarily. And I mean I am not making a statement in behalf of the National Bureau of Economic Research. But in behalf of Finis Welch. The CHAIRMAN. Go to it. Dr. WELCH. Thanks once again for the opportunity to testify. I will only begin by noting that while a minimum wage law carries the potential for a person who otherwise would earn less than the minimum, of increasing his wage; it also carries the burden of his finding an employer who perceives his productivity to be worth the minimum wage. The fact that he otherwise would not have done so is proof in and of itself that either his productivity is less than the legislative minimum, or that in terms of convenience and other considerations, opportunities for job advancement associated with the job, he simply preferred to take a job at that grade. So at the very least, a minimum wage law must be viewed as a mixed blessing for these people. I think the weight of historical evidence is certainly that there have been very, very considerable disemployment effects. The academic literature actually was fairly inconclusive until the study of Tom Moore who testified earlier. And he is the first person who introduced coverage data explicitly. Some of us were not aware that coverage was incomplete. The data had not been published. And once we have begun to embody data on the extent of industrial coverage of the minimum wage legislation along with the level of the nominal minimum, as far as I know, at least in the four studies that have been published subsequently, there have been very significant disemployment effects concentrated primarily within younger workers. Also workers above 65, by the way, concentrated disproportionately in black and female workers. In the most thorough study that I have seen done also at the National Bureau, by Nori Hashimoto and Jacob Mincer, they found statistically significant reductions in the percentage of the population employed associated with increased minimum wages for teenagers, males 20 to 24 years old, and males above 65. Teenagers included females, they were not separated in that analysis. Oddly enough, they found labor force contracts associated with increases in minimum wages so that actually the percentages of reported unemployment were quite uncertain. Varied greatly among the groups. The amount of statistical confidence that you could have was quite unsure because people who lost their jobs in many cases simply would remove from the labor force. Senator TAFT. Do you know whether any figures are available with regard to domestic employment in New York since domestic have been covered there? Dr. WELCH. NO; I do not. Certainly the first data that would be available would be in the 1970 public use survey of the census. And that can be compared to the newly available 1960 census that would allow us to identify New York City. And then we would have a chance to make this kind of comparison. But it has not been done, the data tapes have only been out for 6 months. In my own work I have written one paper with Marvin Kosters that looked at a very, very different facets of minimum wage legislation. We simply assumed total employment was given, we took that as a datum and considered fluctuations in employment have been, say, a longer term trend. Moving into a recession, a thousand people lost their jobs, we asked the question, "How does the minimum wage affect who will lose their job?" What we find roughly is that in the 1954 to 1968 period, again we began in 1954 because that is when the data began, teenagers accounted for, on average, 6.3 percent of employment. But 22 percent of fluctuations in employment associated with the business cycle. We found further that this 22-percent average consisted of a low and high component, the high component being roughly twice the low component. And that effect was associated with increasing the effective minimum wage, the combined effects of raising coverage in 1961, again 1967, or late 1966, with the steady, more or less steady 3- to 4-year upward adjustment in the nominal minimum. We found effects to be most severe within the teenage population on black females, next black males, then white females, and then white teenage males. We found in comparison that increasing minimum wages tended to stabilize employment, to insure against the vagaries of the business cycles, for white adult males primarily. Next in line, white adult females. |