Wage Hikes And Unemployment

Posted on May 23, 2010

“Hope for students in tough job market” (Page B-1, May 16) accurately notes that previous wage mandates have contributed to the current teen unemployment crisis — creating a barrier between teens who want to work and employers who want to hire.

A high minimum wage environment – like that created by the 40 percent increase in the federal minimum wage between July 2007 and July 2009 – has raised the cost of hiring and training entry-level employees like teens. Employers respond by cutting staff hours or positions and, over time, are forced to replace “full-service” positions with “self-service” and “automated.”

A survey of labor economists by the University of New Hampshire found 73 percent in agreement that wage hikes like this decrease the number of jobs for entry-level employees. And major newspapers like the Washington Post, Chicago Tribune and Detroit News have also recognized this, suggesting a lower wage for teens to encourage businesses to hire them this summer.

The consequences of inaction are serious. Research from Northeastern University found that teens without job opportunities – especially economically disadvantaged teens – are more likely to drop out of high school or get tangled up in the criminal justice system.

Michael Saltsman
Washington, DC
The writer is a Research Fellow at the Employment Policies Institute in Washington, DC.