Understanding Lost Jobs
Author: Richard Berman
Publication Date: May 2010
Newspaper: Asheville Citizen Times
Topics: Minimum Wage
Despite what you might hear from politicians spinning positive economic numbers at press conferences, it’s still rough out there in America. The Dow has regained much of its pre-recession strength, but last week’s 10 percent dip was a reminder of the uncertainty and fear remaining in the economy. And though the latest jobs report showed a modest uptick in hiring, millions upon millions of Americans are still unable to find a job. In North Carolina, the unemployment rate is stuck at 11.1 percent, and for teens the nationwide rate is over 25 percent.
But while laid-off construction workers and recent high school graduates are feeling the recession’s sting, the job market for misguided armchair economists remains strong. Bob Herbert, columnist for The New York Times, has written prolifically about the problem of teen unemployment. His policy prescription, to raise the minimum wage, is emblematic of an all-too-common syndrome: self-proclaimed experts who suggest “solutions” that bear no resemblance to practical possibilities. Pundits like Herbert apparently believe that employers have unlimited resources, the federal budget deficit is nothing to worry about, and all our problems can be solved by demanding more money from taxpayers and businesses.
In reality, forcing new costs on businesses won’t create jobs – it will destroy them. And while there’s a chance borrowing billions of dollars to pay for half-baked stimulus schemes will put some people to work in the short-term, we know with absolute certainty that it will drive up the national debt and push us even closer to the precipice of bankruptcy.
When it fits his agenda, Herbert has no trouble recognizing the dire consequences of teen unemployment. In a column last year, he wrote: “Young men and women who remain unemployed for substantial periods of time find it very difficult to make up that ground. They lose the experience and training they would have gained by working. Even if they eventually find employment, they tend to lag behind their peers when it comes to wages, promotions and job security.”
When the government tells businesses how to manage their affairs, it has consequences. And when the government sets a mandatory wage that’s too high, it kills job creation: Imagine you are a teenager looking for work in San Francisco. . You don’t have any specific skills, but you are willing to wash dishes at a restaurant and would be happy to make $5 per hour. Even if the restaurant wants to hire you at $5/hour, the minimum wage in San Francisco is almost double that rate, at $9.79.
For low-margin businesses like restaurants, paying a dishwasher nearly $10 per hour is simply not practical. The ultimate consequence of the high minimum wage is that restaurants hire fewer employees, and more and more teens find themselves without a job. And while the fortunate workers who hold on to their jobs take home bigger paychecks, but the rest take home no paycheck at all.
In Bob Herbert’s perfect world, maybe all unskilled labor would be done by robots while everyone went to college and got jobs writing newspaper columns. But that’s not the world we live in. In America today, hundreds of thousands of teens are jobless because they have been priced out of the labor market. Earlier this year, an analysis by the Center for Business and Economic Research at Ball State University found that roughly 310,000 teenagers have lost out on part-time employment because of the minimum wage hikes of 2008 and 2009.
Those teens aren’t just losing out on the money they’d be making in those jobs. When the recession ends and America gets back on its feet, today’s displaced teens will still be looking for a first job and a foothold in the new economy.
That’s not to say the minimum wage is the sole factor behind the unemployment crisis – but it is a factor. And while no one can predict what next month’s jobs report is going to say, I do know this: the economic recovery is going to come from entrepreneurs and small business hiring new workers, not from pundits and bureaucrats telling the private sector what to do. The sooner government gets out of the way, the faster we can move ahead.
Rick Berman is the Executive Director of the Employment Policies Institute, a nonprofit research organization dedicated to studying public policy issues surrounding entry-level employment.