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A minimum-wage law distorts the market for low-wage labor. To reduce this distortion, some economists advocate a two-tiered minimum-wage system, with a regular minimum wage for adult workers and a lower, sub-minimum wagefor teenage workers. Give two reasons why a single minimum wage might distort the labor market for teenage workers more than it would the market for adult workers.
The single minimum wage might distort the labor market for teenage workers more than for adult workers because: (1) teenagers have a lower value of marginal product, so it’s more likely that the minimum wage will be above their value of marginal product; and (2) the demand for teenage labor is more elastic than for adult labor, so the minimum-wage law distorts the market more. Teenagers earn less than adults so more of the jobs they hold will be effected by a change in the minimum wage. The higher the minimum wages…

e more likely an adult will apply for a job that pays the minimum wages and most employers prefer adult worker so fewer teenagers will be hired. People have a reservation wage and will not take a job that pays less, and adults reservation wage is more than teenagers so with a lower minimum wages a larger fraction of teenagers will work for that wages



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