Minimum Wage, Maximum Teenage Joblessness
"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."
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:
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.