Who Loses with Minimum-Wage Increase? Our Teenagers

. . . and those under the age of 25, who comprise half of those who earn minimum wage. And we can imagine that many of those are young people living at home, trying to earn some extra money as they go to school. (Only 3 percent of workers over the age of 25 earn minimum wage.) We can draw this conclusion based on these facts from a piece at AEI-Ideas: 

The 2010 study “Will a $9.50 Federal Minimum Wage Really Help the Working Poor?” by researchers Joseph Sabia and Richard Burkhauser found that a federal minimum wage increase from $7.25 to $9.50 per hour — higher than the $9 that President Obama has proposed — would raise incomes of only 11% of workers who live in poor households.

 In a 2012 study, Sabia and Robert Nielsen found ”no statistically significant evidence that a higher minimum wage has helped reduce financial, housing, health, or food insecurity among the poor.” Why? You have to earn a wage to benefit and 55% of poor, less-educated individuals between ages 16 and 64 don’t work. Indeed, nearly 90% of the wage earners who benefited from the 40% increase in the federal minimum wage between 2007 and 2009 were not poor. They lived in households with an income two or three times the poverty level.

A 2013 literature review by David Neumark, J.M. Ian Salas, and William Wascher concluded “that the evidence still shows that  minimum wages pose a tradeoff of higher wages for some against job losses for others, and that policymakers need to bear this tradeoff in mind when making decisions about increasing the minimum wage.”

Research Texas A&M economists Jonathan Meer and Jeremy West find raising minimum wage levels may discourage firms over the long-term from hiring new workers. And that may be particularly true thanks to continuing — even accelerating — advances in automation.

The emphasis in the third point is mine. There will be higher wages for some — probably older, more established workers working more hours — and job losses for others — the younger, less experienced, part-time workers. Raising the minimum wage may sound like a good idea, but in the end it more than likely has a negative impact on young people’s prospects for employment.

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