MINIMUM WAGE, MAXIMUM TEENAGE JOBLESSNESS !!!

[Daanyeer]

...."Artificially raising wages for unskilled workers reduces the demand for those workers at the same time that it increases the number of unskilled workers looking for work, which results in an excess supply of unskilled workers"

Source: http://mjperry.blogspot.com/2010/03/min ... enage.html

Friday, March 05, 2010


From today's Wall Street Journal editorial "The Lost Wages of Youth"

"There's plenty of competition, but our vote for the recent act of Congress that has caused the most economic hardship goes to the May 2007 law raising the minimum wage in three stages to $7.25 an hour from $5.15. Rarely has a law hurt more vulnerable people more quickly.

A higher minimum wage has the biggest impact on those with the least experience or the fewest skills. That means in particular those looking for entry-level jobs, especially teenagers. And sure enough, as nearly all economic models predict, the higher minimum has wreaked havoc with teenage job seekers, well beyond what you would expect even in a recession.

Most Democrats won't bend on the minimum wage because it is a core union demand, but free thinkers ought to at least consider the teenage job problem. The long-term danger is that we are building in a higher level of structural unemployment as our least-skilled workers find it harder to climb onto the first rung of the job market.

Washington could at least establish a teenage, or sub-minimum, wage closer to $5 an hour. More than half of all minimum wage workers get a pay raise within one year on the job, so wages will rise naturally with experience and talent. More young people will be hired, and more will learn what it takes to get ahead in America."


MP: The charts above (top chart shows all teens and the bottom chart shows black teens) illustrate the adverse effects on teenage unemployment rates from the three increases in the minimum wage of 13% in 2007, 12% in 2008 and 11% in 2009, totalling to a whopping 41% from $5.15 in early 2007 to $7.25 by July 2009. Before the three-step increase, the teenage jobless rate was choppy from month-to-month but had been fairly stable within a range of between 14-18% over a number of years from 2002-2006.

But then just the first increase in the minimum wage to $5.85 drove teenage unemployment above 20%, and it's stayed there ever since, rising to almost 28% last year before gradually falling to 25% in February. The story is even worse for black teenagers by a factor of 2, since their jobless rates are almost twice as high as the overall teen rate, reaching a high of almost 50% last year, before "improving" slightly to 42% in February.

As the WSJ points out, the minimum wage can have long-term negative effects over a lifetime:


"Most readers remember the work habits they learned from their first job. Showing up on time, being courteous to customers, learning how to use technology—such habits are often more valuable than the actual paycheck. Studies have confirmed that when teens work during summer months or after school they have higher lifetime earnings than those who don't work. So raising the minimum wage may inadvertently reduce lifetime earnings."

Bottom Line: Artificially raising wages for unskilled workers reduces the demand for those workers at the same time that it increases the number of unskilled workers looking for work, which results in an excess supply of unskilled workers. Period. And another term for an "excess supply of unskilled workers" is an "increase in the teenage jobless rate." Despite the wishful thinking of politicians and labor unions, the laws of supply and demand are not optional.



Posted @ 4:45 PM