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Study: Illegal Child Labor in the United States
Sponsored by The Associated Press

V. Cost Savings for Employers

How much, if anything, do employers save by employing minors illegally? It is very difficult to derive an adequate answer to this, primarily because little is known about what types of workers would be employed in the absence of the illegally-employed minors. It is likely that the nature of the substitution depends on the type of illegal employment: youths in hazardous occupations are substituting for adults, while the excessive hours worked by 14- and 15-year-olds may be substituting for work hours of adults or of legally-employed youths. This study estimates the cost savings by separately comparing youths working in hazardous jobs, and those working too many hours in non-hazardous jobs, to young adults (age 18-24) without high school degrees who work in the same occupations.

When such a comparison is made using multiple regression, youths working in hazardous jobs are found to earn an average of $1.38 less than young adults legally working in those jobs, while 15-year-olds working too many hours in non-hazardous jobs are found to earn an average of $.57 less than other youths and young adults working legally in those jobs.{1} Applied to the total hours figures, the cost savings from all illegal employment of youths is about $3.0 million per week, or $155 million per year.{2} Combined with the estimate that youths working illegally are earning about $566 million per year (Table 1), this indicates that legally-employed 15- to 24-year-olds would be earning about $721 million in those same jobs.


{1} The sample was restricted to those less than 25 who had not completed high school, who were in a 3-digit CPS occupation held by at least five illegally-employed youth (n=12,998). The regression used hourly pay as the dependent variable, with dummies for 20 occupations and illegal employment in hazardous work, and two dummies for 15-year-olds who are and are not working too many hours in non-hazardous work. A significant cost savings from having youths work too many hours may come from avoiding recruiting and search costs for new employees; rather than estimate these costs, this procedure assumes the excessive hours are substituting for extra hours of existing employees age 16 and over.

{2} This relies on the finding that 68.9% of illegal work hours for 15-year-olds are found to be due to hazardous work, which is applied to the total hours figures in Table 1 for those 15 and under in order to calculate total cost savings. The NLS-AD dataset was used to impute the pay of those less than 14 years old in Table 1, where it was found that calculated hourly pay of 12- and 13-year-olds in 1994-95 was 86% that of 14- and 15-year-olds, or an average of 72 cents less per hour.


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