The Great Teenage Depression: Minimum Wage Scheduled to Increase By 41% in Two Years
Teenage unemployment (16-19 years old, seasonally adjusted) for July (20.3%) was at the highest level in more than 15 years (see chart above, data here). It seems like that would be pretty newsworthy, but it received almost no media attention.
A Google News search for "teenage unemployment 20.3" resulted in only 11 news reports, and only a few of those stories linked the historic level of teen joblessness to one of the most obvious factors: the 41% percent increase in the federal minimum wage, from $5.15 to $7.25 per hour, scheduled to take place in three steps between July 2007 and July 2009 (the second increase, to $6.55 per hour, just took effect in July 2008).
The only newspaper report that linked the 20.3% teen unemployment rate to the increase in minimum wage was a story in the LA Times, which quoted David Resler, economist at Nomura Securities:
"The July jump in the federal minimum wage rate appears to have had the predicted impact on teen employment: The higher required rate enticed more teens into the job market to search for a smaller number of jobs on offer."
In the blogosphere, there was notably more discussion linking the 20.3% teen jobless rate to the minimum wage increase, see
Bottom Line: Demand curves slope downward, whether it's the demand for gasoline, the demand for cigarettes, or the demand for unskilled workers. We can argue about price sensitivity, elastic demand vs. inelastic demand, availability of substitutes, etc., but higher prices or wages result in a reduction in the quantity demanded. That is, we can argue about the slope, but the slope of the demand curve is always negative.
Higher wages for unskilled workers = fewer jobs for unskilled workers = higher unemployment rates for unskilled workers. Period.
Update: Thanks to Ironman for the new post title.