Minimum Wage Keeps Youth From Working

Posted on October 13, 2010

On January 1, 2011 Oregon’s minimum wage will increase for the seventh time in eight years (“State minimum wage will rise by 10 cents per hour in January,” September 21).

In a state where the teen unemployment rate is already averaging 29.6 percent—one of the highest in the country—it’s going to be even harder to find an entry-level job.

Oregon’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 Oregon 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, D.C.