Minimum Wage Hike Won’t Help Teens

Posted on October 29, 2010

On Jan. 1, Arizona’s minimum wage will increase for the fourth time in five years — this time by 10 cents an hour. In a state where the teen unemployment rate is still averaging 32 percent, it’s going to be even harder to find an entry-level job.

Arizona’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 the teen job market are clear: new research from the United States Military Academy at West Point finds that each 10 percent increase in a state’s minimum wage decreases teen employment by 3.6 percent.

Michael Saltsman, Research Fellow, Employment Policies Institute
Washington, D.C.