Minimum Wage: Destroyer of Teenage Employment

How many times have we heard it?  I heard in this past election cycle.  Part of what one political party wants to do to help the poor among us to increase the minimum wage.

They believe that if they force employers to pay their employees more, then there will be more money for families, and the families will have a better chance to rise out of poverty.

The problem is that this logic has a big, glaring hole:

This year, it’s harder than ever for teens to find a summer job. Researchers at Northeastern University described summer 2007 as “the worst in post-World War II history” for teen summer employment, and those same researchers say that 2008 is poised to be “even worse.”

According to their data, only about one-third of Americans 16 to 19 years old will have a job this summer, and vulnerable low-income and minority teens are going to fare even worse.

One of the prime reasons for this drastic employment drought is the mandated wage hikes that policymakers have forced down the throats of local businesses. Economic research has shown time and again that increasing the minimum wage destroys jobs for low-skilled workers while doing little to address poverty.

According to economist David Neumark of the University of California at Irvine, for every 10 percent increase in the minimum wage, employment for high school dropouts and young black adults and teenagers falls by 8.5 percent. In the past 11 months alone, the United States’ minimum wage has increased by more than twice that amount.¹

The problem is that when you raise the cost of teenage help, then you force the employers to cut back on such help.  In fact, very seldom do these minimum wage increases trickle up the ladder—so the employee that has been working at a place for some time is now paid the same amount that a new person off the street is being paid.

Add to that the high turnover rate in fast food and other common teenage jobs, and you quickly find that it’s more beneficial to keep on the more experienced staff than to give teenagers the job experience.

It’s getting harder to get in on the ground floor of a company because the ground floor’s expectations are higher.  It’s harder to get job experience because it costs more for the employer because Congress believes that all minimum wage jobs are equal and even the teenager that’s living at home with his parents and drives their car and eats their food is the same as the one that has many mouths to feed and has trouble making ends meet.

Government has ended up hurting the very people that they claim to want to help by making available fewer jobs, reducing the hard earned raises (and limiting new ones) and killing off the entry level jobs that get people’s foot in the door.  Instead of equipping people to be better at their jobs, or trying to help place people and build skills, they’re taking away the incentives for businesses to take on new hires and train them.

As with most times government tries to get involved, the cure is worse than the problem.

1. Hat Tip: Say Anything [↩]