Minimum wage for teens protects their job prospects

Original Article:

  • Author: Michael Saltsman

  • Publication Date: July 2015

  • Newspaper: Detroit News

  • Topics: Minimum Wage

When Michigan legislators voted to increase the state’s minimum wage to $9.25 by 2019, they also voted to make it more difficult for teens to get summer jobs.

The state’s teen unemployment rate is still averaging 18.4 percent, and the last thing these frustrated jobseekers need is another barrier to entry. That’s why an expanded youth minimum wage, as introduced by state Sen. Margaret O’Brien, is a modest and necessary step to help correct the unintended consequences of last year’s well-intentioned wage hike.

The minimum wage is one of the most studied issues in economics. The overwhelming majority of research, as summarized by economists at the University of California-Irvine and the Federal Reserve Board, concludes that it reduces job opportunities — particularly for young and unskilled employees who are most likely to be earning it.

Michigan businesses impacted by minimum wage increases — think fast-food restaurants, grocery stores, or retail — don’t reduce teen job opportunities because they’re hardhearted. Many of these employers operate on razor thin profit margins that cannot be maintained without raising prices or cutting costs elsewhere. Because price hikes can reduce a business’ sales, these cuts are often achieved at the expense of job opportunities.

Currently, state law permits a youth minimum wage that’s 85 percent of the full minimum wage for teens age 16 and 17. (The federal minimum wage prevails if it’s greater.) By definition, this youth provision is limited in its ability to mitigate the damage of a wage hike, because nearly 70 percent of the state’s teen labor force is age 18 or 19.

O’Brien’s bill expands current law to cover the entire teen labor force, allowing Michigan businesses to pay the youth wage to employees below the age of 20. (The senator’s bill also makes an adjustment to the lower training wage that employers can pay during the first 90 days of employment.)

The logic here is intuitive: A lower base wage for teens, set at or near the federal minimum wage, helps ensure that employers can continue to offer job opportunities for young adults. Academic research backs this logic up. A study published in Cornell University’s peer-reviewed labor studies journal found evidence that youth wage laws can reduce the negative employment effects of state minimum wage increases.

Opponents of youth wage laws argue that no one should be paid less than the mandated minimum wage, yet ignore the fact that young employees are being compensated by the on-the-job training they’re receiving. Research suggests this on-the-job training compensation is very important. Economists at the University of Virginia and Middle Tennessee State University found that those who are employed in part-time work — including summer jobs — as a teenager earn 20 percent more annually six to nine years after graduation than those who didn’t work.

This earnings differential is often attributed to the “invisible curriculum” of skills developed at first jobs. These soft skills like a sense of urgency, a service mentality, and time management are necessary for employees to succeed in their future careers at any job. In my own first job, I bussed tables at a casual dining restaurant at Canterbury Village in Lake Orion. The work wasn’t glamorous, but the customer service and time management skills I picked up there helped me get my next job — and have helped me throughout my career.

Unfortunately, a higher minimum wage means it now costs Michigan employers more to offer this workplace training than when I was a teen, putting the bottom rung of the career ladder at risk. Expanding the state’s teen minimum wage means that even as the state minimum wage rises, the first rung will continue to exist.