Raising the minimum wage corresponds to a significant drop in the teenage birth rate, according to a new study of state-level U.S. data that sheds light on the unexpected benefits of putting more money in the pockets of low-wage workers.
A $1 increase in the minimum wage is linked to a 2.8% to 3.4% decrease in the number of children born to women between 15 and 19 years old, according to the paper published in the January 2021 issue of Economics Letters. The paper shows a more marked decrease than earlier research on the topic that looked at broader age ranges or fewer wage hikes.
The results come as U.S. President-elect Joe Biden pushes to more than double the federal minimum wage to $15 an hour.
“A higher minimum wage in the state you live in reduces teenage fertility,” said the paper’s author, Otto Lenhart, an economist at the University of Strathclyde in Glasgow, Scotland.
An increase in the minimum wage also led to a smaller -- but still statistically significant -- drop in births by women aged 20 to 39, indicating that wages affects fertility overall rather than delaying the age at which women have children.
Lenhart said the decrease in births could be caused by the “opportunity cost” of abandoning a higher-wage job to have a child, or the fact that teenagers may be more incentivized to keep busy through work in states with higher minimum wages. “There could be several factors,” he said.
The U.S. hasn’t raised the federal minimum wage from its current rate of $7.25 per hour since 2009. However, states can set their own minimum wages, as long as they’re higher than the federal minimum.
In the study, Lenhart exploited data from 380 such state-level minimum wage increases between 1995 and 2017, as well as birth data from the National Center for Health Statistics.
While many academics have examined connections between minimum wages and economic metrics like unemployment or income inequality, Lenhart is one of only a few researchers to zero in on the connection between minimum wages and birth rates.
In 2017, Georgia Tech economist Lindsey Rose Bullinger found that a $1 increase in minimum wages reduced adolescent birth rates by about 2%, driven by white and Hispanic teens -- a smaller decrease than in Lenhart’s paper, which took more wage hikes into account over a larger period.
And in 2020, an article by three researchers in the Journal of Policy Analysis and Management showed that the minimum wage was not significantly associated with birth rates of women with low education levels.
Lenhart said the difference in results between his study and the Journal of Policy Analysis and Management paper could be due to the fact his paper examined births in detail by age cohort, finding an increased effect among younger women. By contrast, the other paper didn't break down the data by age.
One of the authors of the Journal of Policy Analysis and Management served as a referee for Lenhart’s paper, he said.
While supporters of raising the minimum wage often argue in strictly economic terms, Lenhart said that the connection between the policy and other health benefits bolsters their arguments.
“There are unintended health improvement effects,” he said.
In 2014, then-President Barack Obama unsuccessfully pushed for a federal minimum wage increase to $10.10. If Obama’s proposed increase had passed, births would’ve been reduced by 3.7 to 3.9 per 1,000 teenagers, Lenhart found.
Lenhart is originally from Germany and earned his Ph.D. from Emory University in Atlanta, Georgia. Coming to the U.S. from a nation with a stronger social safety net and better access to health care led to a bit of culture shock, sparking his interest in health economics. Much of Lenhart's work focuses on socioeconomic determinants of health, such as the effects of the minimum wage on fertility or the link between paid family leave and food insecurity.
“It’s difficult for people from Europe to understand why the health care system is so inefficient in the U.S.,” he said.
Unlike many academics, Lenhart has written the majority of his articles alone.
“My supervisor doing my Ph.D. encouraged us to do single author papers because it would look better on the job market,” he said.
Because Lenhart’s dissertation also focused on unintended effects of raising the minimum wage, writing the Economics Letters article was relatively easy to put together. In fact, it took Lenhart just a year from conception of the idea to publication, he said.
Lenhart's paper also examined the potential effect of state-level earned-income tax credits, which benefit low and moderate-income people with dependents, finding that states with earned-income tax credits saw minimum wage increases have a bigger effect.
“The study suggests that coupling the two together enhances the effect [on fertility] even more,” he said.
In a future study, Lenhart would like to examine the earned-income tax credit effect in more detail, he said. He would also like to examine minimum wage increases’ effect on women in more detail by breaking down the sample demographically by factors like education, work history and employment status at time of birth, he added.
The study, titled “The effects of minimum wages on teenage birth rates,” was first published in the January 2021 issue of Economics Letters. Otto Lenhart of the University of Strathclyde in Glasgow, Scotland was the sole author.
This story has been updated to clarify the nature of the association between minimum wage increases and fertility rates.