Minimum Wage Increase Prices Teens Out Of Jobs

Posted on January 12, 2011

On Jan. 1, Washington’s minimum wage was increased for the tenth time in 11 years. In a state where the teen unemployment rate is still averaging over 33 percent, it’s going to be even harder to find an entry-level job.

Washington’s minimum wage is indexed to inflation, which means the cost to hire and train entry-level employees such as teens rises almost every year. For labor-intensive businesses with low profit margins, such as 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 — will be forced to turn to more cost-effective alternatives such as automation and self-service.

The consequences for the teen job market are clear: New economic 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
Employment Policies Institute
Washington, D.C.