Tuesday, June 8, 2010
Summer in the City: Journal Sentinel is wrong about the minimum wage and youth employment
High school and college students are having a tough time finding summer jobs.
The unemployment rate for the 16-to-24 age group reached a record 19.6 percent in April, double the national average of unemployment. For those job seekers, said Heidi Shierholz, an economist at the Economic Policy Institute, “This is the worst year, definitely since the early ’80s recession and very likely since the Great Depression.”
According to a recent article by Karen Herzog in the Milwaukee Journal Sentinel, however, this precipitous decline in youth employment is a byproduct of the Wisconsin Legislature's decision to raise the minimum wage to $7.50 an hour.
Herzog presents a few anecdotes from employers to substantiate her claim. But she fails to square her analysis with any recognition that the record rate of youth unemployment is a national problem that predates Wisconsin’s minimum wage increase.
In June 2009 before the minimum wage increase in July 2009 the Bureau of Labor Statistics reported that employment rates among the nation’s teens (16-19 year olds), especially boys, had reached historic lows. During June, the employment rate (seasonally adjusted) of all 16-19 year olds in the nation was estimated to be only 29.2%, meaning that only 29 of every 100 youth ages 16-19 were employed in any type of job in this month..
Over the October-November 2007 to November-December 2009 period, the number of employed teens in the U.S. declined by nearly 25% while the number of employed 20- 24 year olds fell by nearly 11%.
Job loss in relative terms (-25%) among the nation’s teens in the Great Recession is greater than it was for all workers in the Great Depression of the 1930’s (1929-1933). The employment losses for young workers far exceeded those of all other age groups. In fact, the June 2009 employment rate of teens was the lowest ever recorded in the 62 years of employment data that are available from the monthly Current Population Survey dating back to 1948.
Herzog presumably ignores this reality because to acknowledge it would undermine her contention that Wisconsin’s minimum wage increase is the cause of high youth unemployment. Or if she acknowledged it, she would have to make the absurd argument that fear of an increase in Wisconsin’s minimum wage to $7.50 caused employers in every state, several of whom have a higher minimum wage than Wisconsin, to cut back on youth employment..
Attributing high youth unemployment to Wisconsin’s minimum wage increase ignores recent research that indicates that incremental increases in the minimum wage do not undermine employment. Studies of states that actually raised the minimum wage in the early 1990s by economists David Card and Alan Kreuger found no increase in unemployment.
A more recent study by Jeff Chapman that reviewed the experience in all twelve states that had raised their minimum above the federal minimum during this decade concluded:"Despite very strong evidence to the contrary, those opposed to minimum wage hikes continue to claim that such policies have and will eliminate jobs. ...the facts clearly show that the benefits of such increases outweigh any potential costs.”
Youth unemployment is a national problem. It is likely to remain a serious problem without a federal youth jobs program. Blaming it on incremental increases in the minimum wage is inaccurate. It may encourage policy makers to attempt to reduce the minimum wage, but it won't help young people find jobs or earn income.
The report by the Northeastern University's Center for Labor Market Studies concluded:
The severe teen joblessness problem is a year-round problem not confined to the summer. A job stimulus program for teens is needed that will create jobs for youth in the public and nonprofit sectors and provide economic incentives through wage subsidies for private for profit employers to hire teens….The time for comprehensive and sustained policy actions on a wide variety of fronts to get our youth to work is now.”