Nevada’s teen job crisis is summer’s biggest disaster
Author: Michael Saltsman
Publication Date: August 2015
Newspaper: Las Vegas Review-Journal
Topics: Minimum Wage
It was one of the worst releases of the summer.
No, I’m not talking about the box-office disaster known as “Fantastic Four” — although teens who shelled out $10 for a ticket to that movie surely are looking for a refund.
Rather, I’m talking about the monthly jobs report released by the U.S. Bureau of Labor Statistics.
It showed that though teen unemployment has ticked down slightly, labor force participation remains mired at the same rate as the summer of 2011. Meanwhile, more than 11 million teens have dropped out of the workforce entirely. The situation is even worse in Nevada, with teen unemployment averaging 26.4 percent, about the same as the 27.2 percent rate at this time last year.
In a complex labor market like Nevada’s, it’s impossible to identify one reason why youth unemployment remains stubbornly high despite broader economic gains in recent years. While many of these factors are outside the control of Nevada policymakers, one proposed public policy idea would almost certainly exacerbate the problem: a higher minimum wage, which disproportionately hurts young and less-experienced jobseekers.
While both a Republican-backed state Senate bill and a Democrat-backed state constitutional amendment to raise the minimum wage failed in this year’s legislative session, union-backed groups are already looking ahead to next year, moving to put a minimum wage initiative on the ballot. For Nevada’s low-margin, labor-intensive businesses such as those in the restaurant and retail industries, which are primary employers of youth, such a measure could significantly increase operating costs.
In order to absorb the new costs associated with a minimum wage hike while maintaining their razor-thin profit margins, Nevada small businesses would try to pass them off to their consumers in the form of higher prices. While this may work in high-end businesses on the Strip where consumers scarcely glance at the price, it won’t in areas where consumers are price sensitive.
Faced with the threat of losing customers, businesses try to absorb increased labor costs by cutting costs instead. That means reducing job opportunities. And those hardest hit by these lost jobs are young jobseekers who are the least-skilled and therefore the most dispensable to their employers.
Such consequences have been most stark on the West Coast, where cities such as Seattle, Oakland, San Francisco and Los Angeles have dramatically increased their minimum wages. A Z Pizza franchise in Seattle, trendy restaurants in San Francisco and 10 restaurants and grocery stores in Oakland’s Chinatown are just some of the numerous small business to have closed their doors in recent months, citing minimum wage increases as the driving reason.
These aren’t just anecdotes. Last year, the nonpartisan Congressional Budget Office estimated that a half-million jobs would be lost from a $10.10 minimum wage. And two summaries of the best minimum wage research, authored by economists at UC Irvine and the Federal Reserve Board, find that the vast majority of studies conclude that wage hikes cost jobs — particularly among the least skilled.
But it isn’t just a job that Nevada teens are missing out on when the minimum wage increases. They’re missing out on valuable early-career work experience that provides them with an “invisible curriculum” of soft skills like customer service, time management and a sense of urgency that help them throughout their careers. Economists from the University of Virginia and Middle Tennessee State University have found that those who get such experience enjoy an earnings premium throughout their careers over those who did not.
Bad movies come and go, but Nevada youth who miss out on valuable early career employment opportunities are facing long-term harm. Instead of creating new barriers to employment, the state’s legislators should step back and examine the existing ones they’ve already enacted.