Minimum-Wage Increase Increases Teen Unemployment

Posted on October 12, 2010

Ohio’s minimum wage is scheduled to increase again on January 1, 2011 (“Ohio minimum wage set at $7.40 for 2011,” Sept. 30). In a state where the teen unemployment rate is already averaging 23.3 percent, it’s going to be even harder to find an entry-level job.

Ohio’s minimum wage is indexed to inflation, which means the cost to hire and train entry-level employees like teens rises almost every year. For labor-intensive businesses with low profit margins, like restaurants and grocery stores, even a seemingly small increase in labor costs can trigger unintended consequences. As customers continue to demand low prices, employers respond by cutting staff hours or positions and — over time — are forced to turn to more cost-effective alternatives like automation and self-service.

The consequences for teens following the 40 percent increase in the federal minimum wage are a cautionary tale for Ohio policymakers. New research from economists at Miami University and Trinity University holds that federal wage hike between July 2007 and July 2009 responsible for over 114,000 fewer teen jobs nationwide—even accounting for the effects of the recession.

Michael Saltsman
Research Fellow
Employment Policies Institute
Washington, DC