Economics

Minimum Wage, Maximum Unemployment for Youths, or, Bummer in the Summer

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Interesting piece in the DC Examiner, looking at the effects of minimum-wage hikes on summer job opportunities for teens and other relatively low-skilled workers. Snippets:

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.

The percentage of teens classified as "unemployed"—those who are actively seeking a job but can't get one—is more than three times higher than the national unemployment rate, according to the most recent Department of Labor statistics.

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.

More here.

For more about the minimum wage, check out this classic 1995 reason article on the subject.

Update: Here's something from Steven Horwitz on the subject:

If one is tempted to minimize the role of self-interest in the political realm, one might wish to read the debates surrounding the creation of the first federal minimum wage law in the US as well as similar laws as part of apartheid in South Africa.  The backers of the US law were not ignorant of its effects;  they knew exactly what it would do (shut out immigrant and black labor), which is precisely why they supported it, and also why a number of politicians voted for it.

For example, in the April Freeman, David Henderson reports the following story:

At a 1957 hearing on increasing the minimum wage, a northern U.S. Senator who favored the increase stated: "Of course, having on the market a rather large source of cheap labor depresses wages outside of that group, too-the wages of the white worker who has to compete. And when an employer can substitute a colored worker at a lower wage-and there are, as you pointed out, these hundreds of thousands looking for decent work-it affects the whole wage structure of an area, doesn't it?"

Who was the senator? Here's a hint: just four years later he was the President. His name: John F. Kennedy.

JFK was not ignorant of the economics of the minimum wage and neither were the unions he was responding to.  The unions were looking after their collective self-interest and JFK knew where the votes came from.

More here.