We’re Killing Job Opportunities, Creating Hardships
Author: Rick Berman
Publication Date: July 2011
Newspaper: Washington Examiner
Topics: Minimum Wage
A recent survey by the Britain’s National Health Service found 352,000 households where no one has ever held a job. And 68 percent of the adults in those households said they don’t want one.
Generous unemployment benefits and welfare subsidies — including $34.4 billion spent annually on housing, with some families receiving as much as $160,000 to maintain posh London flats — have combined with job-killing minimum-wage increases to make finding work in that nation either a dicey or unattractive proposition.
Before we scoff at the Brits’ employment troubles too loudly, however, we should mind our own. Between endless unemployment extensions and federal policies destroying entry-level employment opportunities, the United States is at risk of entrenching unemployment on this side of the Atlantic.
The number of long-term unemployed in America has skyrocketed during the recent recession. In 2007, about 10 percent of the unemployed had been looking for work for 52 weeks or more. By May of this year, one-third of all unemployed workers had been out of a job for that long.
At least a portion of that increase can be attributed to repeated extensions of unemployment benefits — up to 99 weeks in some states. An analyst at JP Morgan found these extensions account for 1.5 percentage points of the increase in the unemployment rate since the recession began.
And the longer people are out of work, the less likely they are to find a new job — an unintended consequence of the government’s generosity.
Those numbers are largely about people who lost their jobs because of the recession. What about those who were having a difficult time finding work to begin with?
The teen unemployment rate is now 24 percent. In part, it’s due to federal minimum wage increases that have made it more expensive for employers to hire unskilled employees.
Economists at Miami University and Trinity University found that 114,000 fewer teens were employed as a result of the 40 percent federal minimum wage increase between July 2007 and July 2009.
Entry-level jobs are an important first step to adulthood, and the consequences of missing out go far beyond lost spending cash. A study from economists Thomas A. Mroz and Timothy H. Savage found that the consequence of a six-month unemployment period experienced as long as four years ago reduces current salary by 2.3 percent and results in a higher probability of being unemployed in the present.
Inexperienced teens aren’t the only ones having trouble finding work as a result of government meddling, however — college graduates are feeling the pinch, too. A study out of Rutgers found that only 56 percent of those who graduated from college in 2010 had held a job by the spring of 2011 (down from 90 percent for the classes of 2006 and 2007).
One way to ease the transition from school to work and to get valuable experience is the unpaid internship. The National Association of Colleges and Employers found that 42.3 percent of college seniors who had performed an internship received at least one job offer, compared to only 30 percent who hadn’t. But this avenue of experience is also under attack from the federal government.
“If you’re a for-profit employer or you want to pursue an internship with a for-profit employer, there aren’t going to be many circumstances where you can have an internship and not be paid and still be in compliance with the law,” a Department of Labor official told the New York Times last year.
Translation: You may have paid thousands to be taught something in college, but as soon as an employer offers to educate you for free it’s a violation of the law.
As someone who has watched government policy evolve, I’m struck by how often well-meaning people cause hardship for those they’re trying to help.
For example, the nonpartisan Government Accountability Office recently showed that a federally mandated increase to the minimum wage in American Samoa led to a 55 percent drop in employment in the tuna-canning industry between 2009 and 2010. A regulation intended to decrease poverty only increased unemployment.
President Reagan once said “the nine most terrifying words in the English language are, ‘I’m from the government and I’m here to help.’ ” It’s time for the feds to quit “helping.”
Rick Berman is executive director of the Employment Policies Institute.