Minimum Wage and College Enrollment

President Obama’s plans to increase minimum wage were originally met with significant opposition. People feared raising it would lead to higher prices and higher unemployment. Initially, raising minimum wage would lead to increases in unemployment although most economists believe the increase would not be that significant. In the long run increasing minimum wage could help decrease unemployment and increase the wages of low income workers.

On a recent blog post on the Economic Policy Institute Blog, it mentions the recent BLS report on college enrollment and how college enrollment of students who just graduated high school has actually been dropping since 2009. This likely has to do with significant losses in the Great Recession meaning less families can afford to send their kids to college. Parents who are either unemployed or making low incomes cannot support their children through college and a recent high school graduate does not have the financial resources to pay for their college education alone. This could be detrimental to the economy if it continues. These high school graduates would be missing out on learning skills necessary to get a good job. If they are unable to find good jobs, they will be low income workers just like their parents, continuing a cycle that seems hard to break. One solution is helping educate these students in order for them to be able to get better jobs and move up the socioeconomic ladder.

On the FRED Blog, there was a graph posted of the unemployment rates of different levels of education. For those who graduated from college with a Bachelor’s degree or higher have significantly lower and steadier unemployment. During the recession the highest the unemployment rate of that level education ever got was slightly above 5%. On the other hand, for high school graduates with no college education, the unemployment rate was over double that. The unemployment rate for college graduates is much less volatile. Any spikes on the graph are much less significant than those for the lower levels of education.

Raising minimum wage would help educate the lowest class of people. Ultimately it will help those on the on the lower end of the income scale and will help them afford to go to college, allowing them to move up the socioeconomic ladder. In the long run this is good for the economy as it will decrease the number of low income workers and could lead to more equality in the economy. So while it may have some negative consequences in the short run, raising minimum wage would be beneficial for the economy in the long run.

Sarah Tymochko

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5 thoughts on “Minimum Wage and College Enrollment

  1. dgrillo30

    Although I agree with the majority of this blog the only thing that I would like to ask is how exactly the proposed increases in minimum wage would be achieved. Where would this money come from? I would assume a potential increase in taxes, however this could backfire and instead result in low income parents having that much harder of a time saving money for their children’s education. Thus, how can we ensure that an increase in minimum wage and the educational benefits it supplies will not be outweighed by the negative aspects that result from what must be done in order to supply the increases in minimum wage?

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  2. lucaskeefer

    I agree with this post in that raising the minimum wage can definitely have solid long run benefits for the low-income portion of the economy. In practicality, I’m not sure how much a minimum wage increase could actually help one afford to send a child to college. On another note, something that is often overlooked with a minimum wage increase is the taxes that employers must pay. When employers pay workers more, the employer must also pay more in taxes. The higher wage could also translate to increased prices for consumer. Or, the higher wage can also translate to employers trying to hire more qualified workers to correspond to the wage increase. I agree in theory that raising the wage can help, but I think that some items need to be sorted out in practicality first.

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  3. willbonnel

    I could be misinterpreting the point of this blog, but it seems that you are saying that raising the minimum wage would help low-income workers save up money for college, implying that, in the long run, the gains from a more educated workforce would more than make up for the short run increase in unemployment. If this is your point, I would like to see some data on how low-income households actually respond to increases in the minimum wage; a big enough increase in the minimum wage could actually incentivize low-income households not to attend college, since they would be earning a decent wage without a degree. These incentives could lead your plan to actually backfire and result in even less low-income households sending their children to college. If the goal is to send more low-income students to college, a subsidy in the form of college grants for the highest performing low-income students would seem the best plan.

    Reply
  4. colbylohrey

    This blog does strike a good point by saying in the long run we will see a decrease in the unemployment rate and an increase in wages of a low wage worker. As stated above, it is true that in the beginning the effects of this particular change will cause the unemployment rate to raise and we will also see an increase in prices. Since the effects of each of these particular categories, in the short run, will not have as great of an effect the results in the long run will most likely lead to more good than they would bad; as many would perceive. To expand on this particular area of the blog post, two states have in fact decided to follow along with this increase of the minimum wage, these states being Connecticut and Maryland. In a blog post by David Cooper, another writer for the Economic Policy Institute, he discusses some doubts he has for the long run success of this change in the minimum wage. He stated that by July of 2018 Maryland’s minimum wage will have reached the value of $10.10, which in today’s dollars portray’s a loss in the annual salary of a minimum wage worker; not taking inflation into account due to the complexity with it. It is evident that over the years, time will be what ultimately shows what ends up happening with this increase and whether it is a positive or negative change. However, one question to think about is: if this decrease is seen in the annual salary of minimum wage worker, will changing the minimum wage ultimately benefit the economy in the long run?

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  5. letitgoeverythingisawesome

    Couldn’t an increase in minimum wage actually reduce college enrollment? I mean, if a high school grad can make ok money in an easy job thanks to the higher minimum wage, maybe that reduces his or her incentives to go get more training and a better job.

    Reply

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