Nationwide, our employment numbers are improving. But for young Americans looking to advance their careers and develop skills, they’re just another piece of bad news.
Teen unemployment has risen again, to 23.8 percent. In Georgia, the jobless rate for young adults averages 28 percent; it’s nearly 40 percent for the state’s black teens. And only one in five Georgia teens was employed in 2011, half the employment rate of 10 years ago.
The recession has played a role, and young people face more competition for part-time jobs. Teenagers in Georgia and elsewhere, however, are also paying the price for the good intentions of their elected representatives.
Between 2003 and 2007, in an effort to boost pay of lower-income employees, 28 states raised the minimum wage above the federal level. The policy didn’t work as hoped. Economists from American and Cornell universities found no associated reduction in poverty.
As it turns out, very few minimum wage employees were living in poor households.
But there was another problem: Higher mandated wages reduced employers’ demands for less skilled employees, such as teenagers. The 40 percent federal wage hike that followed between 2007 and 2009 compounded that problem, especially in Georgia.
Economists at Miami and Trinity universities, in a study of the federal wage increase, found the negative impact on teens in Georgia was second only to Texas. Nearly 10,000 fewer Georgia teens were employed, a 9.2 percent employment drop.
A quick economics lesson helps explain why.
Establishments that employ Georgia’s young adults, such as grocery stores or restaurants, keep just a few cents from each sales dollar and have a customer base with a high sensitivity to price hikes. When labor costs rise 40 percent in two years, the only option is to do more with less. That means fewer employees serving customers and more customers serving themselves.
Some job seekers lacking in experience suffer more than others. That’s a harsh truth for teens in general but especially so for vulnerable subgroups. A recent study found that for black males without a diploma between 16 and 24 years of age, each 10 percent increase in minimum wage led to an employment drop of 6.5 percent. (For white males, it was 2.5 percent).
These young adults lose more than spending money. Teenage unemployment can have a damaging impact for years. While others learn punctuality, productivity and teamwork, unemployed youths are falling behind in a way that’s hard to make up for later. Less opportunity and lower wages are the result.
Embracing minimum wage increases might make legislators feel like they’re doing something proactive and helpful. But policies like this have effects worse than legislative inactivity. Take it from today’s frustrated teens: It’s time legislators moved on.
Michael Saltsman, research fellow, the Employment Policies Institute
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