Georgia parents, prepare yourselves: With a 30.6 percent teen unemployment rate heading into the summer, your jobless kids might be making withdrawals from the Bank of Mom & Dad for their cash.
There are a number of factors at work: More competition from older job seekers, for instance, has put young and inexperienced applicants at a disadvantage. But also at fault are a series of ill-conceived minimum wage mandates at the state and federal level, which raised the cost to hire and train teens who fill those jobs.
Those teens can only hope that President Barack Obama and Congress won’t make it worse with another proposed wage increase.
Nationally, teen unemployment has been above 20 percent every summer since 2009. That’s four straight summers — soon to be five — of record teen unemployment. They’ve all occurred during or since the 40 percent hike in the federal minimum wage between 2007 and 2009.
Writing in 2010, economists at Miami and Trinity universities estimated that, even accounting for the effects of the recession, at least 114,000 young adults lost job opportunities as a result of federal wage hike. (Other economists have put that figure above 300,000.)
Percentage-wise, this came out to a 6.9 percent drop in teen employment in the states affected by all three stages of the federal wage hike. For teens with less than 12 years of schooling, the relative drop in employment was even higher, 12.4 percent.
One need only look at the businesses that employ teens to understand why. Nearly 40 percent of the nation’s employed teens work in the leisure and hospitality industry — restaurants, movie theaters, hotels and the like — while another 25 percent work in retail jobs at grocery stores, service stations and such.
These types of businesses aren’t exactly rolling in dough. Their profit margins are generally 2 or 3 cents on every sales dollar. Sudden spikes in labor costs leave these businesses with two options: Raise prices, or reduce costs.
When raising prices isn’t an option, the only other is to provide the same product with less service. This might mean having waiters or waitresses bus their own tables or opting for a self-service alternative to young grocery baggers.
The data bear this trend out: Teens’ share of employment in the leisure and hospitality industry dropped by over 20 percent between 2007 and 2011. In retail, it’s fallen by nearly 30 percent over that period.
This makes it all the more baffling that wage-hike advocates in Congress would raise the minimum wage by another 40 percent, to $10.10.
This may be good politics, but it’s certainly not good policy. Teens, whether in Georgia or anywhere else, start climbing the employment ladder through their first summer jobs. Further minimum-wage hikes only postpone their ability to get these jobs, which research shows hurts future earnings, employability and professional development.
That might not seem pressing to the teens who will just lie on the beach or lounge on the couch for the next three months. But it is much more concerning for their parents, who want nothing more than a good future for their kids and, maybe, some peace and quiet between now and September.
Michael Saltsman is research director at the Employment Policies Institute.
