The Minimum Wage & Teen Unemployment

The October 5, 2009 article "Record Teen Unemployment: Only WSJ Seriously Looks At Minimum-Wage Hikes As Cause," on the politically conservative newsbusters.org suggests that recent increases in the minimum wage have increased unemployment, especially for teenagers:

Based on the data, the current job situation for teenagers in America is the worst on record.

According to Uncle Sam's Bureau of Labor Statistics:

Seasonally adjusted teenage unemployment hit 25.9%. That is the highest rate in the nearly 62 years BLS has been reporting this number. The previous record was last month's 25.5%. The record before that was 24.1% in November and December of 1982. A graphic of the complete history of the teenage unemployment rate that will open in a new window is here.

Unemployment among black teens not enrolled in school is over 50%.

The rate among 20-24 year-olds is also alarmingly high at 15.1%.

Almost alone among establishment media publications -- and even then in an editorial, not a regular news report -- the Wall Street Journal commented on this distressing set of circumstances, identified the most likely cause of the problem, and worried about its longer-term consequences:

Washington will deny the reality, and the media won't make the connection, but one reason for these job losses is the rising minimum wage.

Earlier this year, economist David Neumark of the University of California, Irvine, wrote on these pages that the 70-cent-an-hour increase in the minimum wage would cost some 300,000 jobs. Sure enough, the mandated increase to $7.25 took effect in July, and right on cue the August and September jobless numbers confirm the rapid disappearance of jobs for teenagers.

The September teen unemployment rate hit 25.9%, the highest rate since World War II and up from 23.8% in July. Some 330,000 teen jobs have vanished in two months.

.... The biggest explanation is of course the bad economy. But it's precisely when the economy is down and businesses are slashing costs that raising the minimum wage is so destructive to job creation. Congress began raising the minimum wage from $5.15 an hour in July 2007, and there are now 691,000 fewer teens working.

.... Congress and the Obama Administration simply ignore the economic consensus that has long linked higher minimum wages with higher unemployment. Two years ago Mr. Neumark and William Wascher, a Federal Reserve economist, reviewed more than 100 academic studies on the impact of the minimum wage. They found "overwhelming" evidence that the least skilled and the young suffer a loss of employment when the minimum wage is increased. Whatever happened to President Obama's pledge to follow the science?

.... Study after study reveals that there are long-term career benefits to working as a teenager and that these benefits go well beyond the pay that these youths receive. A study by researchers at Stanford found that those who do not work as teenagers have lower long-term wages and employability even after 10 years. A high-wage society can only come by making workers more productive, and by destroying starter jobs the minimum wage may reduce long-term earnings.

.... If Congress won't suspend its recent minimum wage hike, it should at least create a teenage wage of $4 or $5 an hour to help put hundreds of thousands of teens back to work. White House chief economic adviser Larry Summers has endorsed this in the past. Without this change, expect the teen unemployment to remain very high for a long time.

The wonder of it all is that liberals still call "progressive" a policy that has driven the wages of hundreds of thousands of the lowest skilled workers down to $0.00.

The chances of a teen minimum getting through Congress, let alone being signed by the president, are unfortunately slim and none. The objection to the idea in the 1970s was that it would encourage employers to "fire the father and hire the son." Perhaps that fear was slightly justified in the case of interchangeable blue-collar jobs decades ago, but it's hard to believe that it would be a problem in today's much more technical and skill-based economy.

The Journal is virtually alone in noting the teen unemployment/minimum wage hike correlation. A September 23 AP report, while noting how ineffectual federally funded teen job-finding efforts were this summer, doesn't even mention the minimum wage. A September 4 story on the topic at the New York Times by Catherine Rampell devotes all of one sentence to the possibility that minimum-wage hikes might be largely to blame ("Increases in the minimum wage may have made employers reluctant to hire teenagers, said Marvin H. Kosters, a resident scholar emeritus at the American Enterprise Institute"), and doesn't even bother to evaluate it. Instead, Rampell tries to pin the blame on older workers reluctant to retire (even though there has been a dramatic spike in workers retiring to take Social Security benefits this year), and the higher percentage of kids in college (that shouldn't affect summer or Christmastime availability).

One possibly valid point Rampell raises is that "the ability of more young people to rely on family may allow them to be pickier about jobs and therefore to stay out of work longer than they did in previous recessions." My interpretation of this is that "too many overprotective parents are shielding their kids from the 'mean, cruel world.'" More kids than ever aren't taking their first job, even in good times, until they have stopped going to school either after high school or college. Part of the blame should probably also go to high school extracurriculars that demand what I believe are often excessive summertime commitments (e.g., band, sports). I'm not sure that parents, or the schools, are doing kids any favors by keeping them away from the early lessons one can learn in exposure to the working world.

Cross-posted at BizzyBlog.com.

—Tom Blumer is president of a training and development company in Mason, Ohio, and is a contributing editor to NewsBusters