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This paper reexamines the relation between minimum wages and labor market outcomes for teenagers in the US. Economic theory suggests that real minimum wages drive labor market outcomes. Instead of the commonly used nominal minimum wages, we therefore use real minimum wages to examine this relation. Increasing real minimum wages are associated with a reduction in teen employment and working hours. The correlation with real hourly wages of teenagers is positive. These results are robust to the choice of the control group, whether we compare labor market outcomes in the respective state to all other states or to spatially close states, only. This strongly suggests that interpreting nominal minimum wage changes as minimum wage shocks is not a valid identification strategy.

The theoretical literature argues that labor markets outcomes are affected by real minimum wages. Real minimum wages, however, co-move with the business cycle; their correlation with labor market outcomes should therefore not be interpreted causally. We employ structural vector autoregression to distinguish between endogenous variation in real minimum wages, e.g. due to changes in the stance of the business cycle, and exogenous shocks. Impulse responses show that in the US, real minimum wage shocks increased teen wages and lowered employment and working hours of teenagers.

The standard model of optimal minimum wage policy in a perfectly competitive labor market suggests that a positive tax rate on minimum wage income is Pareto inefficient. However, most countries with minimum wage legislation exhibit a positive tax rate on minimum wage income. We solve this alleged puzzle by introducing discrimination of individuals that do not contribute to social welfare, typically individuals that do not participate in the political process, into the standard model. If minimum wages serve discriminatory purposes, a positive tax rate on minimum wage income can be compatible with optimal government policy. In the empirical part, we show that the share of inhabitants approving of labor market discrimination against immigrants and against women is positively related to the presence of minimum wage legislation in the respective country. Im Falle perfekt kompetitiver Arbeitsmärkte ist ein positiver Steuersatz auf Mindestlohneinkommen Pareto ineffizient. Ein solcher Politikmix ist jedoch für nahezu alle OECD-Länder zu beobachten. Um diesen vermeintlichen Widerspruch aufzulösen führen wir die Möglichkeit der Diskriminierung von sich nicht am politischen Prozess beteiligenden Personen in das Standard-Modell ein. Sollte der Mindestlohn dazu dienen, bestimmte Personengruppen aus dem Arbeitsmarkt zu preisen, kann die Besteuerung von Mindestlohneinkommen eine aus Sicht der Regierung eine optimale Politik darstellen. Dies sollte sich in einem positiven Zusammenhang zwischen der Zustimmung zur Diskriminierung von politisch wenig aktiven Minderheiten und dem Vorhandensein eines Mindestlohns manifestieren. Im empirischen Teil zeigen wir, dass es einen positiven Zusammenhang zwischen der Zustimmung zur Diskriminierung von Ausländern und Frauen am Arbeitsmarkt und der Wahrscheinlichkeit eines Mindestlohns im jeweiligen Land gibt.