Policymakers play Grinch on minimum wage: Guest commentary
Author: Michael Saltsman
Publication Date: December 2014
Newspaper: Los Angeles Daily News
Christmas has come early this year for young adults seeking a holiday job, with new data from the Bureau of Labor Statistics showing that retailers went on a 430,000-job hiring spree (on a seasonally unadjusted basis) during the month of November.
Unfortunately, new research from economists at the University of California, San Diego suggests that ill-considered minimum wage hikes could steal these jobs away faster than the Grinch stole Christmas.
Though President Obama’s proposed $10.10 minimum wage has failed to gain traction in Congress, minimum wage increases have proliferated at the state and local level. In far-left locales like San Francisco and Seattle, residents and their representatives have made a $15-an-hour minimum wage — $30,000 a year for a full-time employee — the law of the land. Meanwhile, even voters in “red” states — faced with ballot box options and little to no business community opposition — have approved of more modest wage hikes.
Proponents have argued that raising the labor costs of low profit-margin employers has little to no effect on job opportunities. As President Obama argued in a speech last year, “there’s no solid evidence that a higher minimum wages costs jobs.” Unfortunately for the president, the nonpartisan Congressional Budget Office disagreed, marshaling reams of “solid evidence” to estimate that a $10.10 minimum wage would cost the country a half-million jobs.
More recently, the UC San Diego researchers estimated in a new paper published at the National Bureau of Economic Research that the 40 percent federal minimum wage increase between 2007 and 2009 reduced both employment and income growth for targeted workers — many of them young and low-skilled. The authors specifically highlight the impact of “lost wage growth associated with reductions in experience accumulation” — in other words, the longer-term consequence of sitting at home on the couch instead of working a part-time job during the holiday season.
Jobs aren’t lost because employers are mean-spirited; rather, it’s because their customers demand low prices. Faced with a wage mandate that can’t be offset through a price increase, employers are instead forced to reduce staffing levels and do more with less. The full-service shopping experience is replaced with a self-service alternative.
It might be convenient for the customer, but it’s wholly inconvenient for the young people who no longer have a job. Missing out on early work experience can have ramifications for these young adults beyond just the lack of extra cash. An emerging body of research shows that it also hurts their earning potential later in life because it prevents them from gaining the general, yet valuable, workplace skills that employers demand.
An Employment Policies Institute report from economists at the University of Virginia and Middle Tennessee State University found clear evidence that part-time work by young adults translates to future career benefits. Young adults employed part-time at the turn of the millennium earned 20 percent more six to nine years later than their counterparts who weren’t employed, according to the researchers.
Seasonal teen jobs have even been credited with reducing anti-social behavior. A study published recently in the journal Science found that teens employed in a summer jobs program in the city of Chicago were 43 percent less likely to be arrested for a violent crime relative to their counterparts who weren’t in the program.
Unfortunately, none of this has stopped lawmakers at the state and federal level from playing Grinch with teens’ job prospects, calling for further increases to the minimum wage that would put entry-level opportunities further out of reach. It’s a fate even worse than a lump of coal in a Christmas morning stocking.