Minimum Wages And Adolescent Alcohol Use: Evidence From A Natural Experiment

Renewed interest in the minimum wage has led many policy makers to consider it as a possible strategy to achieve poverty reduction. Literature on the social determinants of health has intimately linked health with income and so if such a policy reduced poverty it may lead to beneficial health outcomes. We consider the possibility of adverse health outcomes associated with minimum wage hikes. Using a sample of adolescents from Newfoundland and Labrador, we examine the impact of a two-tiered minimum wage law on their frequency of alcohol use and frequency of getting drunk over the period of 1998 to 2001. We exploit this two-tiered wage by using a differences-in-differences econometric approach where formally employed adolescents who would be eligible for the minimum wage are compared to informally employed and unemployed adolescents. As they age, the formally employed group was eligible for the higher minimum wage but the comparison groups were not. Our results demonstrate that being eligible for the minimum wage increased the frequency with which the formal group got drunk but did not increase their frequency of alcohol use as compared to the informal and unemployed groups.