Pay Hike Prices Georgia Teens out of Workforce

Original Article:

  • Author: Michael Saltsman

  • Publication Date: February 2013

  • Newspaper: Atlanta Journal-Constitution

  • Topics: Minimum Wage

It’s tough being a Georgia teenager in search of a job. The Bureau of Labor Statistics reports that Peach State teens faced a 29.6 percent unemployment rate in 2012, one of the highest in the nation.

Unfortunately, President Obama’s State of the Union proposal to raise the federal minimum wage by 24 percent stands to make the situation worse. The president denies this, citing a University of California-Berkeley study to argue that jobs won’t disappear after a minimum wage increase.  Activists from coast to coast have picked up on the message. Some have gone so far as to claim that new labor costs mean new jobs. But 85 percent of credible economic studies on the minimum wage point in the opposite direction. They confirm wage hikes hurt the employment prospects of the least-skilled.

The White House and its supporters look a bit foolish standing on the opposite side of this consensus, especially with the recent evidence from the 2007-2009 federal wage increase. The minimum wage spiked 40 percent from $5.15 to $7.25. Economists at Miami and Trinity University estimate some 114,000 young adults were priced out of jobs as a result.

Worse yet, teen unemployment has remained above 20 percent countrywide for more than four years, a record since the Labor Department started tracking these numbers. You don’t need to have a Ph.D. in economics to understand why teens would feel the pinch from a wage mandate.

The businesses at which they are most likely to work face thin profit margins of roughly 2 or 3 cents from every dollar.  Mandated increases in labor costs can’t be absorbed with margins like these. Businesses instead have to offset the cost through raising prices, or more likely, by providing the same product with less service. That means more customer self-service, and fewer opportunities for the people who used to fill those jobs.

Losing these jobs means losing the bottom rung on the career ladder. The skills that teens pick up in these first years in the workforce are invaluable. From teamwork to timeliness, the foundations of a successful professional life are often learned flipping burgers or waiting tables.

So here’s a tip for legislators from Georgia and elsewhere who are considering the president’s plan: Don’t price your kids out of the jobs they need. It’s better for them to start at the bottom of the wage scale than to never start at all.

Michael Saltsman is research director at the Employment Policies Institute.