Government Wage Keeps Teens Out Of Work
Author: Michael Saltsman
Publication Date: January 2011
Topics: Minimum Wage
If you hopped into a time machine — De Lorean or hot tub, doesn’t matter which — and traveled back to a fast-food operation at the start of the past decade, you’d probably notice something different, but you might have a hard time putting your finger on it.
Prices might be marginally lower, but that probably won’t be what’s bothering you; a value menu is a value menu, after all. The packaging might be a little bit different, but that’s not it, either. It’s the staff that’s caught your eye. They seem so much younger than they are now, and there are so many more of them.
You aren’t crazy: Teens’ share of restaurant industry employment has fallen from 24 percent at the start of the decade to 17 percent today.
In fact, there are fewer teens participating in the work force in general. And fewer teen workers are needed, as the cost to hire continues to grow and businesses replace workers with automation or self-service.
A variety of factors have come together to put a serious damper on the job market for young people. The two recessions we’ve weathered in the past decade haven’t helped, and the continued decline of manufacturing as a source of livelihood also has contributed to a changing work force. But while some of these reasons are beyond the control of state and federal policymakers, there are also controllable factors hurting teenagers’ job prospects. Increases to the minimum wage phased in by both states and the federal government over the past decade have left teens across the country out of work.
Steep drop in Tennessee
A new Employment Policies Institute analysis of Census Bureau data shows that in Tennessee, on average, only 25.4 percent of all teens are employed — that’s down 23 percentage points from 10 years ago. But Tennessee isn’t the only state where teen employment is falling. At the start of the decade, out of the 20 most populous states, only one had a teen employment percentage averaging below 30 percent. Ten years later, 16 of those same 20 states have less than 30 percent of their teens employed.
Identifying the exact number of teen jobs lost as a direct result of minimum-wage increases can be tricky. But two recent studies that carefully control for other economic and demographic variables give us some idea.
Joseph J. Sabia of the U.S. Military Academy at West Point looked at state and federal minimum-wage increases between 1997 and 2007 and found that each 10 percent increase in the minimum wage in a state corresponded with a combined drop of employment for 16- to 19-year-olds of 3.6 percent.
William E. Even of Miami University and David Macpherson of Trinity University completed the picture, with research showing that the 40 percent increase in the federal minimum wage between July 2007 and July 2009 resulted in a 6.9 percent drop in employment in affected states; more than 114,000 fewer teens were employed as a result, with larger employment losses possible as businesses adjust over the long term.
These job losses shouldn’t come as a surprise: Increasing labor costs decrease demand for that labor. Given customer resistance to higher prices, traditional teen employers such as restaurants are forced to make do with less labor by introducing self-service or more automation. The least-skilled workers are the first to go, and who has fewer skills than teenagers? These are workers who almost by definition have never had a chance to accumulate workplace skills.
But as policymakers choose to ignore economics and raise the minimum wage (16 states and the District of Columbia now have rates higher than the federal level) they’re leaving teens out of work and missing out on the important “invisible curriculum” learned in a first job. Skills such as customer service and working with a supervisor can’t be learned in the classroom. Studies have shown that there are real consequences for missing these lessons; teens who are unemployed for long periods of time risk lower earnings in the future and demonstrate an increased chance of unemployment later in life.
With many states considering indexing their minimum wages to inflation — and some having already done so — just know that you were forewarned about the unintended consequences.
Michael Saltsman is the research fellow at the Washington-based Employment Policies Institute.