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Congress to Teens: Don’t Work



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My colleague James Sherk draws our attention to an overlooked aspect of today’s grim employment report, in which the unemployment rate increased to a 26-year high of 9.7%. Specifically, job-seeking teenagers have been particularly hard hit. Sherk attributes their predicament to the recent congressionally mandated increase in the minimum wage:

For the most part that means teenagers and unskilled workers. Teenagers, lacking experience and education, have low productivity. So when the last portion of the minimum wage increase took effect at the end of July employers responded by letting teenage employees go in large numbers.

Why has teenage unemployment jumped so sharply? In part the deteriorating economy. But also because Congress voted to put teenagers out of work. The August employment report is the first after the minimum wage increase took effect at the end of July. Of course, that is not what Congress said it wanted to do when it raised the minimum from $5.15 to $7.25 an hour.

But no matter what Congress sets the minimum wage at the true minimum wage is always zero. Employers do not have to hire workers, and they will not when hiring an additional worker brings in less money than that workers adds to the company. Consider an unskilled teenage worker whose labor increases a restaurant’s earnings by $7.00 an hour. The restaurant will pay up to $7.00 an hour to hire that worker. But when Congress raises the minimum wage to $7.25 that worker will lose his job. No restaurant will hire workers for a loss. Any business that did so would quickly go bankrupt. By raising the minimum wage Congress voted to lay off every worker who produces less than $7.25 an hour.

For the most part that means teenagers and unskilled workers. Teenagers, lacking experience and education, have low productivity. So when the last portion of the minimum wage increase took effect at the end of July employers responded by letting teenage employees go in large numbers.

Why is this so important? Because this boneheaded policy blunder can cause long-term and irreversible harm to today’s teens:

[M]inimum wage jobs are entry level positions. They are the first rung on young workers career ladder, where they learn essential career skills such as self-discipline, accepting direction from a boss, and interacting productively with customers and co-workers. Minimum wage positions provide on-the-job training in career skills. As minimum wage workers gain these skills they become more productive and earn raises – two-thirds of minimum wage workers earn a raise within a year. Cutting off the bottom rung of this career ladder means that teenage workers delay acquiring these skills. This hurts their earnings and employment prospects for up to a decade later. If Congress hopes to change teenage workers employment prospects it should stop pricing them out of their jobs.

A very happy Labor Day indeed to our nation’s aspiring teenagers.



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