Jobless Michigan Teens Can Thank the Minimum Wage Hike

  • Author: Michael Saltsman

  • Publication Date: July 2010

  • Newspaper: Detroit News

  • Topics: Minimum Wage, Teen Unemployment

Teens have it pretty tough these days. From bullies and standardized tests to peer pressure and Facebook fights, modernity is adding stress to every aspect of the lives of young adults.

This summer, you can add the death of the entry-level job to that list of woes. Young adults are facing unprecedented unemployment rates — and the figures for dropouts and minorities are even more staggering.

No matter how you slice it, the numbers are bad. The unemployment rate for Michigan teens is averaging over 26 percent — more than one in four are looking for work and unable to find it.

Vulnerable groups like high school dropouts and minorities have been hit especially hard. Dropouts between the age of 16 and 24 were dealing with 33 percent unemployment in April. African-American dropouts in the same age group suffered an eye-popping 60 percent unemployment.

Though economic prospects have never been particularly rosy for those lacking a high school education, these numbers have skyrocketed since April 2007, up from 20 percent and 37.8 percent, respectively. So why the huge spike in joblessness?
The “Great Recession” certainly hasn’t done anyone any favors. But something else happened between 2007 and 2009: a 40 percent increase in the federal minimum wage.

The job-killing nature of minimum wage hikes is well understood. Indeed, it has been documented since the establishment of the very first minimum wage: the administrator of the Wage and Hour division of FDR’s Labor Department wrote that “there have been reports that workers who had been receiving less than [the minimum wage] had been laid off.”

The unskilled workers that proponents of higher wages claim to be helping are especially hard hit: University of California-Irvine’s David Neumark has found that a 10 percent increase in the minimum wage correlates to a nearly four percent decrease in employment for black and Hispanic 16- to 24-year-olds.

As business owners tried to explain before the minimum wage hikes went into effect, higher wages make it too expensive to hire and train young, inexperienced workers. The jobs they do are frequently replaced by automation, self-service, or a reduction in service quality, e.g., longer lines for service.

Do you wonder why you pump your own gas, bus your own tray at Burger King, and are now starting to bag your own groceries at the supermarket? Consumers are constantly trading price for convenience. Jack up the price too high for some jobs and employers will find a way to keep price stable by rethinking how to deliver a product or service with fewer employees.
Unfortunately, the hardest hit are those who most need the jobs being eliminated. Low-wage jobs are where teenagers and high school dropouts learn the skills needed to advance in their careers. They’re an entry point for people to acquire a skill set and learn the “invisible curriculum” unavailable in the classroom: little things like showing up to work on time, learning to deal with customers and coworkers, and other skills those in the working world tend to not even think of as “skills.”

How can we help these young adults along in their careers? Instead of trying to implement a top down solution — Congress has suggested spending $1 billion to create 300,000 summer jobs, meaning that each new job “created” would cost more than $3,300 in taxpayer money — why not allow them to work for less than the minimum wage? Instead of being locked out of the labor market, these workers would have a chance to gain the skills needed for well-paying jobs in the future.

Michael Saltsman is the research fellow at the Employment Policies Institute, a nonprofit research organization dedicated to studying public policy issues surrounding entry-level employment.