Tuesday, July 22, 2008

Why are we surprised?

The Wall Street Journal is reporting that teenage unemployment could be at its highest rate in decades:

A weaker summer employment market, stemming from an anemic economy and higher age requirements for many jobs, has resulted in a idle summer for many teens. Almost one in four 16- and 17-year-olds can't find work, and the Northeastern University Center for Labor Market Studies found this summer's teen employment rate could reach a postwar low. That decline could have implications far into the future.


Howard Rosen, an economist with the Peterson Institute for International Economics, said that though teenage labor data are volatile, the figures could indicate a problem in the teenage job market. He said higher minimum wage requirements may be leading employers to favor older workers.

A higher minimum wage encourages employers to move away from the use of unskilled teenagers. Typically, they will give more work to current employees or hire more skilled workers instead. The Fair Minimum Wage Act of 2007 boosted the federal minimum wage from $5.85 to $6.55 this summer and to $7.25 next summer - that's a 24% increase over two years! Are we to be surprised that a dramatic increase in the minimum wage is followed by a dramatic jump in teen unemployment?

BHI did a study of a proposed minimum wage hike in Massachusetts several years ago and found that it would hurt low wage workers - the exact people that it was supposed to help.

Politicians love raising the minimum wage because it makes them feel good about themselves. If they paid attention to the actual consequences of their actions, they would feel a lot different.

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