If you’re a teenager unable to find a job this summer — or a parent with a teenager hanging around the house — you’re not alone. The latest data from the U.S. Bureau of Labor Statistics show that the teenage unemployment rate was at a stubbornly high 24.5 percent in June, and because the unemployment rate only includes people actively seeking work, the true number of teens who cannot find jobs is likely higher. For most of the past two years, the rate has been above 25 percent.
While the overall weak economy is certainly at fault, another major factor was the decision by Congress and President Bush to raise the minimum wage over 40 percent in the face of a weak economy, without exempting teenagers — thus pricing teens out of the labor market and denying them crucial work experience.
Economists have tried to measure the effects of a minimum wage. Hundreds of studies have been completed, focused primarily on low-skilled and teenage employment. The consensus result has been that for every 10 percent increase in the minimum wage, a 1 to 3 percent decrease in employment is observed, disproportionately affecting low-skilled, mostly young workers.
The last minimum-wage increase was in July of 2009, when the final dollar increase of the legislation passed back in 2007 took effect. Adjusted for inflation, the minimum wage is currently 36 percent higher than the minimum wage of 2006. A study released in June by University of Chicago economist Casey Mulligan estimates that the most recent minimum-wage increase (after adjusting for the effects of the recession) resulted in the loss of 800,000 jobs, mostly by low-skilled and young workers.
The political argument for a minimum wage is that compensation below a certain level is exploitative and inadequate to support a family. We don’t agree that a minimum wage is the right solution to this problem, but regardless, that rationale is simply not relevant for teenagers trying to enter the first rung on the employment ladder, get out of the house, and earn some spending money.
Thom Hartmann, a leading progressive radio and television host with whom we almost never agree, recently said: “I don’t have a problem with saying a minimum wage doesn’t apply to people under 18 or somebody who hasn’t graduated from high school.” So this is not a left-right issue.
The Organization for Economic Cooperation and Development (OECD), a group of 34 of the world’s most advanced economies, suggested in an April 2010 report that teen unemployment could be reduced by exempting teens from the minimum wage and instead instituting a “sub-minimum training wage.” In fact, only half of the OECD countries even have a minimum wage, and 9 of those 17 — including many in Europe — have a training wage for teenagers. Larry Summers, the former director of Obama’s National Economic Council, has reportedly advocated that the United States create such a wage. We agree.
The existing Youth Minimum Wage provisions of the Fair Labor Standards Act are inadequate because of their limited scope and 90-day cap. As the Wall Street Journalhas correctly observed, the 90-day cap makes employers unlikely to hire at all.
It would be great if teens could all find summer work at $7.25 an hour or more. But many teenagers with no job experience can’t, and so they end up not working, earning nothing, and missing out on valuable work experience. So here is our modest proposal, which we think should gain bipartisan support in Congress: Exempt teenagers from the 2007 legislation increasing the minimum wage. Let them work for $5.15 an hour — if they want to and that’s what an employer wants to pay. Let them gain work experience and move up the wage ladder from there.