Are Summer Jobs ‘Going Out of Business?’

Fewer Teens Gain Valuable Employment Skills this Summer
  • Publication Date: July 2009

  • Topics: Teen Unemployment

WASHINGTON D.C. – New employment data released Thursday, July 2 confirmed what economists (and parents of teenagers across the country) feared – the bad economy and increasing federal minimum wage have had a disastrous effect on teens looking for jobs this summer.

The latest employment data continues to show an increase in unemployment for America’s teens, which reached the highest rate in 17 years this spring and continued to climb over the summer. The teen unemployment rate is currently at 24 percent, a nearly 12 percent increase from earlier this summer and 2.5 times the national unemployment rate. African American teen unemployment is at 37.9 percent, 4 times the national unemployment rate. National African American teen unemployment has increased by over 27 percent in one year.

Summer months have historically been a time when teenagers flock to entry-level employment opportunities, and in doing so, gain valuable job skills that increase their chance of successfully entering the adult workforce.

“The unintended consequence of the federal minimum wage hike is pricing some employees out of the workforce, and based on the recent unemployment data, it’s teens – minority teens especially – who are getting hit the hardest,” said Kristen Lopez Eastlick, Senior Research Analyst for the Employment Policies Institute. “A job for a young employee is a chance to gain important skills and learn the invisible curriculum that comes from being employed.

Unfortunately many teens were denied the chance to learn skills that come with having a first job this summer because of an auto pilot wage increase coming on top of shrinking business profits.”

“The weak economy combined with high mandated wage levels created a perfect storm of unemployment for less experienced groups like teenagers this summer,” Eastlick continues. “Teens were pushed out of the job market by higher skilled applicants, including more experienced workers laid off due to economic woes.”

Overwhelming amounts of economic research predicted that there would be an increase in job losses for teens and other vulnerable groups as a result of the 2007 federal minimum wage hike legislation. The federal minimum wage is set to increase again on July 24th, straining an already lean teen job market even further.

New research from economist Eric Fruits found that if Oregon and Washington’s minimum wage rates had been equal to the federal wage level between 2003 and 2008 (instead of the states’ higher mandates), the unemployment rate would have been more than 3 percentage points lower than it is now. That is approximately 100,000 lost jobs between the two states – employment opportunities that would still be available had the states remained at the federal minimum wage. Economists continue to establish a strong link between minimum wage increases and job loss.

According to research from the University of California-Irvine that looked at job loss during a good economy, the negative effects of wage hikes are overwhelmingly concentrated on the most vulnerable employees, particularly young minorities and high school dropouts. Research from the University of Georgia found that every 10 percent increase in the minimum wage was associated with a 4.6 to 9 percent decline in teenage employment in small businesses.

For vulnerable teens, a lack of entry-level job experience can have a long-term impact. A study out of Stanford University found that youths who experienced especially long periods of unemployment were particularly prone to negative long-term effects on future wages and employment. Research from the University of North Carolina, Chapel Hill, found that unemployment for teens continues to adversely affect earnings for as long as 10 years.

The Employment Policies Institute is a nonprofit research organization dedicated to studying public policy issues surrounding entry-level employment. For additional information contact Samantha O’Neil at 202.463.7650.