Mark Perry has a nice piece on proposals to raise the minimum wage from $7.50 to $10, a 38% increase. He begins with research that finds an elasticity of demand between -0.1 and -0.15 or a 2-3 percent reduction in employment from a 20 percent increase in the minimum wage.
Accordingly, a 38 percent increase in the minimum wage to $10 per hour would reduce teenage employment by between 3.8 and 5.7 percent. And what would that mean for the number of jobs eliminated and the increase in the jobless rate?
If the 38 percent increase in the minimum wage to $10 per hour had the minimum effect of reducing teenage employment by “only” 3.8 percent, that would put 171,000 currently-employed teenagers out of work and increase the teen jobless rate almost three full percentage points to 26.6 percent. At the high end, a 5.7 percent reduction in teen employment would put almost one-quarter million teenagers out of work and drive the teenage jobless rate up to 28.1 percent, the highest rate in history.