Date

2012

Department or Program

Economics

Primary Wellesley Thesis Advisor

Phillip Levine

Abstract

The state of education in the U.S. is declining. While education spending has skyrocketed for the past three decades, the high school graduation rate has stagnated. Perhaps of more concern, the U.S. high school graduation rate currently ranks 21st among OECD countries. Three potential factors that could affect teenage schooling decisions are the minimum wage, compulsory schooling laws, and minimum competency testing. The education policies would seem to have an obvious relationship to this outcome. The effects of the minimum wage on schooling decisions, however, have not been documented as extensively. A change in the wage could have a direct effect if an increase in the minimum wage causes teenagers to reevaluate their labor market prospects and then choose to leave school if they feel they can find a higher-paying job, or stay in school if they see fewer jobs being made available. This thesis utilizes three decades of American Community Survey data to perform a quasi-natural experimental analysis that examines the effects of the minimum wage, compulsory schooling laws, and minimum competency testing on teenage schooling decisions. I find that an increase in the minimum wage has little effect on the high school dropout rate, but it encourages some students to enter the labor force after graduating from or completing high school rather than going on to tertiary education. Additionally, compulsory schooling laws increase high school graduation rates, but exit examinations, it turns out, have a counterproductive effect, inducing some students to drop out or take the GED rather than submit to the requirement.

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