Tuesday, June 01, 2010

Teenagers: Silent Victims of Minimum Wage Laws

The New York Times has a long article today in its Business Section about the dismal job market for teenagers this summer, here are some excerpts from "Job Outlook for Teenagers Worsens":

"This year is shaping up to be even worse than last for the millions of high school and college students looking for summer jobs. With so many people competing for so few jobs, unemployed youth “are the silent victims of the economy,” said Adele McKeon, a career specialist with the Boston Private Industry Council who counsels students on matters like workplace etiquette, professionalism and résumé writing.

Getting the first job “is an accomplishment, and it’s independence, Ms. McKeon said. If you don’t have it, where are you going to learn that stuff?”

The unemployment rate for the 16-to-24 age group reached a record 19.6 percent in April, double the national average. For those job seekers, said Heidi Shierholz, an economist at the Economic Policy Institute, “This is the worst year, definitely since the early ’80s recession and very likely since the Great Depression.”

MP: Not once in the 1,300 word article does the writer discuss the devastating effects on teenage employment of the 41% increase in the minimum wage from $5.15 per hour in early 2007 to $7.25 by the summer of 2009.  Thanks to Jeff at the Added-Value Blog for pointing this out.  Here's my re-write:

This year is shaping up to be even worse than last for the millions of high school and college students looking for summer jobs. With so many people competing for so few jobs, unemployed youth “are the silent victims of the economy minimum wage legislation” said Mark Perry, professor of economics at the Flint campus of the University of Michigan.

Getting that first job “is an accomplishment, and it’s independence. If you don’t have it, where are you going to learn that stuff?” said a career specialist.  According to Perry, "With a 41% increase in the minimum wage between 2007 and 2009 from $5.15 to $7.25 per hour, the chances of getting that first job, along with valuable experience, on-the-job training and independence will now be more difficult than ever before. 

Especially during an economic downturn, unskilled workers have a potentially powerful weapon and advantage that can give them a competitive edge over skilled workers in a weak labor market - low wages. But between 2007 and 2009, politicians took away the competitive advantage of unskilled workers at the time they needed it most, by boosting the minimum wage for unskilled workers by 41%, and essentially pricing them right out of the worst economy and labor market since the early 1980s."

The unemployment rate for the 16-to-19 age group reached 25.4 percent in April, 15.5 points higher than the national average of 9.9% (see chart above). For those job seekers, said Heidi Shierholz, an economist at the Economic Policy Institute, “This is the worst year, definitely since the early ’80s recession and very likely since the Great Depression, in large part due to the increase in the minimum wage increases in 2007 (13.6%), 2008 (12%), and 2009 (10.7%)." 

As researchers at Northeastern University, who issued a report in April on youth unemployment, put it, “The summer job outlook does not appear to be very bright in the absence of a massive new summer jobs intervention, or a repeal of the minimum wage legislation.

The poor numbers this year are not solely a symptom of the continued weak economy, but have been made far worse by the recent hikes in the minimum wage. For generations, government data shows, at least half of all teenagers were in the labor force in June, July and August. Starting this decade, though, the number of employed teenagers began to drop, and by 2009, less than a third of teenagers had jobs. This year, the number could fall below 30 percent, and teenagers have the minimum wage to thank for the worst job prospects in a generation for their age group.

The forecast for this summer is so dire that high school students took to the streets this year in Washington, Boston and New York to push lawmakers to come up with money for summer youth jobs programs as Congress did last year, allocating $1.2 billion for a program for low-income youths. repeal the minimum wage law that students refer to as the "teenage job killer."

Update from Don Boudreaux: "Suppose Uncle Sam orders you (The New York Times) to raise by 41 percent the price you charge for subscriptions to your newspaper. Would you be surprised to find a subsequent fall in the number of subscribers? If you assigned a reporter to investigate the reasons for this decline in subscriptions, would you be impressed if that reporter files a story offering several possible explanations for the fall in subscriptions without, however, once mentioning the mandated 41 percent price hike?

60 Comments:

At 6/01/2010 8:49 PM, Blogger Value Added said...

So here's the question, Times readers (I am one, though sometimes I wonder why):

Is this willful economic ignorance or dishonest reporting on the part of Times editors?

I have my suspicions...

Thanks very much for linking, Mark!

 
At 6/02/2010 2:57 AM, Blogger PeakTrader said...

The economic literature shows an increase in the minimum wage has little or no effect on employment.

It's "willful economic ignorance or dishonest reporting" to promote the belief an increase in the minimum wage has a negative effect on teenage employment.

Also, this week's employment report:

Strong Jobs Number on Friday Could Give the Markets a Boost
June 1 2010

"Economists expect the US economy generated about 540,000 jobs in May.

Kurt Karl, chief US economist at Swiss Re in New York: "We should get about 200,000 a month. It's not a gigantic number but it will be enough to sustain this recovery."

[A drop to 8.2% in 2011] from the current 9.9% rate would require the creation of 323,000 jobs for each of the next 20 consecutive months, according to calculations from Nicholas Colas, chief market strategist at ConvergEx in New York."

 
At 6/02/2010 3:02 AM, Anonymous Ian Random said...

I'm confused isn't the minimum wage supposed to decrease poverty and bring everybody up. I wish the law had that for every increase in the minimum wage, a corresponding decrease in anti-poverty spending had to occur.

 
At 6/02/2010 5:44 AM, Blogger Value Added said...

Peak:

You're saying that an arbitrary increase (government-mandated) in the cost of unskilled labor to the tune of 41 percent had no effect on the market for unskilled labor?

I don't agree.

 
At 6/02/2010 5:53 AM, Blogger Value Added said...

Also:

"The economic literature shows an increase in the minimum wage has little or no effect on employment."

What?

 
At 6/02/2010 6:00 AM, Anonymous Anonymous said...

The numerical differential in unemployment rates has low signal to noise meaning. What matters is the ratio.

I would surmise that the ratio of teen to non-teen unemployment has averaged 3.5 since BLS started its statistical base. It would tend to rise above trend during recessions and fall below trend during expansions.

In any event, the market clearing wage for teens is predominately higher than the minimum (floor) wage in 2009. Only 6.5% of teens were paid at the floor wage. The rest were paid higher wages or were in exempt jobs.

The rise in teen unemployment during the Great Recession was primarily due to cyclical factors, not increases in the minimum wage.

 
At 6/02/2010 6:03 AM, Anonymous What's New in our Beautitul World said...

I wish the law had that for every increase in the minimum wage

 
At 6/02/2010 6:04 AM, Anonymous Extraordinary Thing said...

Is this willful economic ignorance or dishonest reporting on the part of Times editors?

 
At 6/02/2010 9:04 AM, Blogger sethstorm said...

Bullshit. They can be made to accept these people if they have no other solution.

Kill offshoring first, and force the acceptance of these people at these wage levels. Then make it more costly to outsource it or have some staffing agency abstract away the risk. Finally, make it impossible for them to require a degree at all for anything. State that there is no exemption quantity, that it applies to everybody.

 
At 6/02/2010 9:09 AM, Anonymous geoih said...

Quote from PeakTrader: "The economic literature shows an increase in the minimum wage has little or no effect on employment."

So supply and demand is a lie? Every worker is infinitely productive. All you have to do is pay them more money and they'll automatically be that much more productive. Then why don't we raise the minimum wage to $100 an hour? Just think of the productivity.

 
At 6/02/2010 9:17 AM, Blogger juandos said...

"The economic literature shows an increase in the minimum wage has little or no effect on employment"...

Who's economic literature PT?

From Walter Williams: Minimum Wage Cruelty

'The unemployment effect of minimum wages isn't restricted to American Samoa but to the mainland U.S. as well. Overall teenage unemployment stands at a record 25 percent while adult unemployment hovers around 10 percent. Also at a record high is the 50 percent unemployment rate among black teenage males. One might ask why teen unemployment, particularly that among black teens, is so much higher than adult unemployment. The answer is simple. One effect of a minimum wage law is that of discrimination against the employment of less-preferred workers. Within the category of less-preferred workers are those with low skills. Teens are disproportionately represented among such workers and are therefore more adversely affected by minimum wages. Black teens are disproportionately represented among teens with low skills and therefore share a greater burden of minimum wages'...


From Thomas Sowell: Basic economics: a citizen's guide to the economy

Read page 169...

 
At 6/02/2010 9:20 AM, Blogger juandos said...

There's our sethstorm, always willing to spend someone else's money for his silly ideas: "Kill offshoring first, and force the acceptance of these people at these wage levels"...

 
At 6/02/2010 10:47 AM, Blogger Ron H. said...

>"Kill offshoring first, and force the acceptance of these people at these wage levels"

sethstorm, I don't really expect a sensible answer, but I have to ask anyway: How do you propose to prevent companies from increasing their business activities in other countries and decreasing activity in the US? Or, maybe just closing up shop in the US and reopening somewhere else?

Listen carefully to what Steve Winn says in the first video in this article, then ask yourself how bleak things will be when in the US he, and many others like him leave for greener pastures.

 
At 6/02/2010 11:17 AM, Blogger misterjosh said...

I predict that this will lead to a rise in teenage entrepreneurship. Most likely under the table, since documentation requirements have gotten absurd. Teenagers can pay themselves whatever they want, and most likely won't even end up paying taxes.

 
At 6/02/2010 11:59 AM, Anonymous Anonymous said...

Peaktrader, I haven't seen a lot of studies on this, but the ones I have had a couple problems.

They were urban coastal area biased. So they study areas with a large sample size, but also areas which are most likely to have market wages above the minimum wage. Last one I saw dealt with fast food in New Jersey. If it was like California at the same point, the market rate was several dollars above the minimum at that same time.

They focus on teen unemployment rates rather than teen employment rates. Unemployment relies upon teens looking for jobs, but since teens don't necessarily need jobs, they are more likely to drop out of the market if they're priced out.

I've seen decisions first hand as minimum wages have increased in California. This was pre-recession since CA increased before the Feds.

One medium sized manufacturer client just started eliminating starter jobs. So they scaled back the cleanup crew, slowly getting the people on the floor to self maintain their area. Then at the next increase, they just dropped the day crew completely. They also cut back janitorial to half the crew so instead of cleaning every building every night, they alternated nights.

The janitorial crew wasn't teenagers so the stats would just show several teenagers among all those laid off. An academic would say that it didn't affect teenage employment, but the shop floor jobs were stepping stone jobs and the janitorial weren't.

 
At 6/02/2010 12:01 PM, Blogger sethstorm said...


Listen carefully to what Steve Wynn says in the first video in this article, then ask yourself how bleak things will be when in the US he, and many others like him leave for greener pastures.

Sounds like:
1) A man who will say anything to open a casino somewhere.
2) Someone that has enough contempt for the United States to warrant Patriot Act usage.

Nice looking casinos. Drove by the ones in Vegas, but observed a certain arrogance around them. Not surprised to see him do a Benedict Arnold in light of that.

Better deals can be had without all the glitz and auto-charging fruit tables(move a piece of fruit, get charged for it- no matter if you wanted it).

He wants to move? Fine. Make him turn his soul and deeds to all US-based Wynn properties and holdings(direct or indirect) at the door. Then hand them to a private entity that agrees to keep offshoring off the table.


How do you propose to prevent companies from increasing their business activities in other countries and decreasing activity in the US? Or, maybe just closing up shop in the US and reopening somewhere else?

Looks like you've been reading from the European playbook. In the first case, that's already definable as offshoring. In the other case, throw the book at them and make them take an unacceptably huge (and nontransferable) loss. They want to turn their back on the nation, there are very high costs.

Also an option is preventing it by reason of national security. See Dubai Ports and the attempted takeover of Chevron by CNOOC as successful blocking of assets from being transferred to hostile countries.

--

So much money and time spent in avoiding regulations & US citizens, when obeying them would at least allow them to profit that much more.


I predict that this will lead to a rise in teenage entrepreneurship.

Fine enough, just not as a tax dodge for their parents.

 
At 6/02/2010 12:14 PM, Blogger sethstorm said...

A lower wage is not a better negotiating position - it reflects a worse negotiating position.

 
At 6/02/2010 12:23 PM, Anonymous morganovich said...

no seth, that's completely untrue.

if you have apples worth 50 cents but are not allowed to sell them for less than a dollar, that means there is no market and you can't sell them at all.

minimum wage puts a floor on the value of labor that can be sold meaning that the unskilled are left unable to find a market clearing price for what they have to offer and chronically unemployed.

it also shifts producers away from labor and towards capital as a means of production eliminating jobs.

 
At 6/02/2010 12:56 PM, Blogger Ron H. said...

>"2) Someone that has enough contempt for the United States to warrant Patriot Act usage."

Not the United States, but the United States GOVERNMENT. Big difference.

>"He wants to move? Fine. Make him turn his soul and deeds to all US-based Wynn properties and holdings(direct or indirect) at the door. Then hand them to a private entity that agrees to keep offshoring off the table."

You are OK with government seizing private property? Like this guy does?

Or like this?

>"throw the book at them and make them take an unacceptably huge (and nontransferable) loss."

What book is that, sethstorm?

>"Also an option is preventing it by reason of national security. See Dubai Ports and the attempted takeover of Chevron by CNOOC as successful blocking of assets from being transferred to hostile countries."

You could stretch a phony national security argument thin enough to cover Las Vegas casinos?, come on, sethstorm, that's ridiculous even for you.

>"So much money and time spent in avoiding regulations & US citizens, when obeying them would at least allow them to profit that much more."

I'm not sure that Steve Wynn has become a multi-billionaire by choosing the least profitable path, but I guess anything is possible.

 
At 6/02/2010 1:20 PM, Blogger Ron H. said...

misterjosh said: - "I predict that this will lead to a rise in teenage entrepreneurship. Most likely under the table, since documentation requirements have gotten absurd. Teenagers can pay themselves whatever they want, and most likely won't even end up paying taxes."

These teenagers have found ideal business opportunities based on the those criteria.

 
At 6/02/2010 1:25 PM, Blogger Ron H. said...

>"The economic literature shows an increase in the minimum wage has little or no effect on employment."

Peak, Is that really what you meant to say? I too would be interested in your sources.

 
At 6/02/2010 1:57 PM, Anonymous grant said...

This is a problem that could be very easily solved with a little bit of creative intelligence,Something the lumbering cumbersome Embalmer government does not have any of.
They miss every opportunity to prove themselves "intelligent" including this one.

 
At 6/02/2010 2:51 PM, Blogger sethstorm said...


Not the United States, but the United States GOVERNMENT. Big difference.

Yes, I am aware of that vast difference. However, his contempt affects both the US Government and the United States.


You are OK with government seizing private property? Like this guy does?

Or like this?

No. Have the aforementioned items be resold directly to another private sector entity.

The government only places a condition upon sale that follows all covered items. That condition is to not offshore or outsource any part of it, resell it such that Wynn (directly or indirectly) regains control, structure it to get around the conditions, sabotage it, or to scuttle it.

The government does not touch it, they simply offer Wynn an exit. It also allows the business to continue, without his influence. It is a test of his contempt for both the US Government and the United States. He just simply has to sell it to someone outside his influence, is a US citizen, and agrees to the terms.


You could stretch a phony national security argument thin enough to cover Las Vegas casinos?

It has to apply evenly. If Wynn is willing to put the United States up to the fire to settle a dispute with the US Government, the issue rests with him.

 
At 6/02/2010 3:07 PM, Anonymous Anonymous said...

Real World here; I raised sugar cane, rice, soybeans, cattle, corn, and crawfish in Louisiana in the 60s, 70s, and the early 80s. I used teenagers to plant cane and pick up hay. (Fall after school & weekends.) The Sugar Act set a minimum wage for unskilled labor and raised it every year. When I moved on we used mechanical planters and balers that were handled with fork lift attachments on tractors and employed ZERO teenagers.

I am macquechoux

 
At 6/02/2010 3:46 PM, Blogger Ron H. said...

>"No. Have the aforementioned items be resold directly to another private sector entity."

So, you ARE in favor of seizing private property to be sold to another private entity. You don't believe in property rights, you know, as in life, liberty and property? These are the guiding principles of the country you accuse Wynn of holding in contempt, but you disagree with those principles yourself. Shame on you.

You are apparently unfamiliar with Kelo VS. City of New London - my second link above.

Perhaps you feel that government should hold ALL property so businesses could be assigned the workers someone in government thinks they should have.

I happen to believe that the function of government is to PROTECT those property rights.

 
At 6/02/2010 4:00 PM, Blogger sethstorm said...

Ron H. said...
You're trying to confuse things here.


What I describe is a private sector-to-private sector transaction. The government does not touch that property. They do not get any deeds, titles, or ownership. Wynn gets to sell the property to a willing entity in the private sector that agrees to those terms.

 
At 6/02/2010 4:05 PM, Blogger PeakTrader said...

A 41% increase in the median wage will certainly reduce employment substantially. However, a 41% increase in the minimum wage has an uncertain result on employment.

Few people work for the minimum wage, because few people are willing to work for the minimum wage. A higher wage will attract more and better people, and perhaps increase employment.

Survey of economists:

Until the 1990s, economists generally agreed that raising the minimum wage reduced employment. This consensus was weakened when some well-publicized empirical studies showed the opposite, but others consistently confirmed the original view. Today's consensus, if one exists, is that increasing the minimum wage has, at worst, minor negative effects.[60]

According to a 1978 article in the American Economic Review, 90 percent of the economists surveyed agreed that the minimum wage increases unemployment among low-skilled workers.[61]

A 2000 survey by Dan Fuller and Doris Geide-Stevenson reports that of a sample of 308 American Economic Association economists, 45.6% fully agreed with the statement, "a minimum wage increases unemployment among young and unskilled workers", 27.9% agreed with provisos, and 26.5% disagreed. The authors of this study also reweighted data from a 1990 sample to show that at that time 62.4% of academic economists agreed with the statement above, while 19.5% agreed with provisos and 17.5% disagreed. They state that the reduction on consensus on this question is "likely" due to the Card and Krueger research and subsequent debate.[62]

A similar survey in 2006 by Robert Whaples polled PhD members of the American Economic Association. Whaples found that 37.7% of respondents supported an increase in the minimum wage, 14.3% wanted it kept at the current level, 1.3% wanted it decreased, and 46.8% wanted it completely eliminated.[63]

Surveys of labor economists have found a sharp split on the minimum wage. Fuchs et al. (1998) polled labor economists at the top 40 research universities in the United States on a variety of questions in the summer of 1996. Their 65 respondents split exactly 50-50 when asked if the minimum wage should be increased. They argued that the different policy views were not related to views on whether raising the minimum wage would reduce teen employment (the median economist said there would be a reduction of 1%), but on value differences such as income redistribution.[64] Klein and Dompe conclude, on the basis of previous surveys, "the average level of support for the minimum wage is somewhat higher among labor economists than among AEA members."[65]

In 2007, Daniel B. Klein and Stewart Dompe conducted a non-anonymous survey of supporters of the minimum wage who had signed the "Raise the Minimum Wage" statement published by the Economic Policy Institute. They found that a majority signed on the grounds that it transferred income from employers to workers, or equalized bargaining power between them in the labor market. In addition, a majority considered disemployment to be a moderate potential drawback to the increase they supported.[66]

From Wikipedia under Minimum Wage

 
At 6/02/2010 4:20 PM, Blogger PeakTrader said...

Also, why does China have a labor shortage with an overabundance of potential workers?

Perhaps, because they're unwilling to work for low wages.

Chinese factories struggle to hire
By Paul Wiseman, USA TODAY
4/11/2005

DONGGUAN, China — The unthinkable is happening in China: This country of 1.3 billion can no longer find enough people willing to work long hours for low wages churning out cheap consumer goods for the export market.

Entrepreneur Johnny Jiang, who owns a plastics factory in Dongguan, says workers used to be too frightened to make demands. Now, they'll walk out if he doesn't boost pay.

Yau...says he just quit his factory job. After two years, he is tired of earning less than $75 a month from an employer who withholds pay when workers don't meet production quotas. Yau plans to get some technical training and join the army.

In January, entrepreneur Jiang visited Hunan University...to recruit engineering graduates. He borrowed an office and waited at a desk for applicants for two hours. No one showed up.

Workers are increasingly knowledgeable about the job market. Local governments in the Chinese hinterlands are trying to keep rural workers informed about job conditions in the booming coastal areas. And migrants themselves are trading information about which factories are good employers and which are stingy and cruel.

"Factories in China have been spoiled," says economist Chi Lo, author of The Misunderstood China. "They still want to pay cheap wages."

Also, I may add, an analogy is a baseball team. You can pay rock bottom wages for rock bottom players, or pay a little more to attract better players and become competitive (of course, some businesses don't have to be competitive, or are charity cases).

Moreover, a rise in the minimum wage has little or no effect on employment. However, if it has a negative effect, the laid-off workers would receive unemployment benefits, while the employed workers received higher wages. So, raising the minimum wage would have a stimulative effect on economic growth.

 
At 6/02/2010 4:35 PM, Blogger Value Added said...

"Few people work for the minimum wage, because few people are willing to work for the minimum wage."

True enough, Peak Trader. But the few who do work for minimum wage tend to be teenagers. Which brings us back to the point of the post.

As for your assertion that an increase in the minimum wage "has little or no effect on employment," I'm just not sold. When you arbitrarily increase the cost of doing business, profitability suffers. Less profitability equals less employment. It's really not complicated.

 
At 6/02/2010 4:43 PM, Blogger PeakTrader said...

Value Added, you're making assumptions that may or may not be true:

Characteristics of Minimum Wage Workers: 2008

"Among employed teenagers paid by the hour, about 11 percent earned the minimum wage or less, compared with about 2 percent of workers age 25 and over."

Also, when you hire better workers, you may get better production or service and more satisfied customers. You may increase revenue and profit.

 
At 6/02/2010 5:04 PM, Blogger Ron H. said...

sethstorm said: - "What I describe is a private sector-to-private sector transaction."

Since you won't read it, I'll post the relavent core of Kelo here. You can still ignore it, but you can't say you weren't aware of it.

Kelo v. City of New London, 545 U.S. 469 (2005)[1] was a case decided by the Supreme Court of the United States involving the use of eminent domain to transfer land from one private owner to another to further economic development. The case arose from the condemnation by New London, Connecticut, of privately owned real property so that it could be used as part of a comprehensive redevelopment plan

This is EXACTLY what you are recommending when you say someone should be forced to give up their property, even though you said you didn't agree with seizing private property. The REASON for the seizure, or the holding or non holding of title by government, has no bearing.

Hugo Chavez is doing the exact same thing in Venezuela by seizing farms, in the name of "the people", that he calls "underutilized" to give to others, most likely his friends and supporters, so they can be better "utilized".

In any case these actions, and those you recommend, are acts of a tyrannical and oppressive government. I'm not sure you really want them happening in this country.

What do YOU have that someone might ask government to take from YOU?

 
At 6/02/2010 5:16 PM, Blogger Ron H. said...

sethstorm, did I mention that what you are recommending is illegal and unconstitutional?

 
At 6/02/2010 5:20 PM, Anonymous Anonymous said...

When the minimum wage is raised above the local market price, businesses with a low profit margin don't hire new people. Salaried employees spend more hours at work. When minimum wage workers leave, they are not replaced.

Granted, the minimum wage is only one factor in the unemployment scenario, the regulative climate for small businesses is becoming increasingly oppressive, adding cost to employment and making temporary work for unskilled workers difficult to come by.

I wish it were otherwise,

AZMom to two of those umemployed young adults who don't show up in the statistics but are jobless nevertheless

 
At 6/02/2010 5:28 PM, Blogger Value Added said...

Peak,

You make a decent point. But minimum wage is about 25% higher than it was in 2008, without any government-mandated increase in profitability (goofy, yes, but that's the point).

I would be interested to know how many teenagers (those who are fortunate enough to be employed, that is) are making minimum wage today. My guess is that it's significantly more than 11 percent.

 
At 6/02/2010 6:33 PM, Anonymous grant said...

Pt?
Honda in china has and is having problems with their Chinese national workers and even though Honda has raised their wages to the point that wages are not the only problem.
Other issues in the work area are proving to be the main issues causing continuous rolling strikes against the company.

 
At 6/02/2010 6:58 PM, Blogger Ron H. said...

>"Also, when you hire better workers, you may get better production or service and more satisfied customers. You may increase revenue and profit."

peak, those "better workers" are those whose skills already make them more valuable. They are likely already working for more than minimum wage, and will likely be hired at more than minimum. The minimum wage selects out those whose value to an employer is less than that amount.

As mimimum wages is raised, those at the bottom lose out, or won't get hired as they aren't valued at the higher wage.

 
At 6/02/2010 7:02 PM, Anonymous ValueAdded'snemesis said...

But the few who do work for minimum wage tend to be teenagers

818,000 teenagers work at or below the minimum wage. 2,754,000 20-70+ age workers work at or below the minimum wage.

What are you yakking about? There are more 20-24 year olds working for shit pay than there are teenagers. Maybe mommy's basement is the way to go if you are a teen.

 
At 6/02/2010 7:06 PM, Blogger Value Added said...

So...I have a 'nemesis'...

Good to know.

 
At 6/02/2010 8:25 PM, Anonymous grant said...

RON H,
Young people do not have their wits about them or have lifes experience behind them.
Consequently they are often employed [off the books]and told when they apply for a job that it pays say $5.00 per hour as long as the employer keeps rolling the staff over they are rarely caught for this as there is rarely a complaint.
Obviously a lot more goes on than honest people realise.

 
At 6/02/2010 8:40 PM, Anonymous grant said...

Sethstorm:
You are wasting your talents! You are the perfect candidate for a high position in a labor union because you chant their un-relenting arguments exactly.

 
At 6/02/2010 11:27 PM, Blogger Ron H. said...

grant said: - "Young people do not have their wits about them..."

I have often noticed that.

...consequently they are often employed [off the books]and told when they apply for a job that it pays say $5.00 per hour as long as the employer..."

Grant, are you responding to something I wrote? If so, I don't know what it is.

I can't imagine an employer turning over their staff frequently if they were paid off book and under minimum wage. I would expect that practice to create a large pool of grumpy ex-employees, more likely to complain to a labor board. If I had employees willing to work for $5/hr, as in your example, I would keep them as long as they were willing to work at that rate.

 
At 6/02/2010 11:54 PM, Blogger Addie said...

I am Adele McKeon and I'm wondering how it's okay to completely change and misrepresent my quote in the NYT article. When I googled my name your "rewrite" comes up-and I don't want your opinion mistakenly attributed to me-you are incorrect about minimum wage being the catalyst for the decrease in youth employment and I don't want anyone thinking that I agree with your opinions or viewpoint-whether you crossed my name out and altered my quote or not-you do NOT have my permission to use my name attached to your opinions-in any way-please remove it.

 
At 6/03/2010 1:58 AM, Blogger PeakTrader said...

Ron, if your reservation wage is $10, and you heard about a job for minimum wage, would you even apply? Of course not.

Also, if your salary is $100,000, and you know the value of your work is worth at least $200,000, however, because of corporate rules, you can only get a small raise, would you be happy? No.

How many people, including teenagers, aren't working because the pay is too low? I bet, it's quite a few. They're better off living with their parents or starting college.

Moreover, there are firms that lay off higher quality and higher paying workers and replace them with younger and lower quality workers just to save money, although the quality of their products take a nose dive.

Furthermore, a firm may be better off without some poor workers willing to work for rock bottom wages.

 
At 6/03/2010 3:00 AM, Anonymous grant said...

ADDIE McKEON:
This site is an economics site.The material[ whether it is yours or not] put up here is not taken as absolute, and a discussion which takes place around economic theory knowledge and teaching is what you are witnessing. If it seems extreme to you it is really teaching all on this site to be fined tuned into better knowledge.Thanks for putting up an interesting topic it is drawing a large amount of debate.

 
At 6/03/2010 3:02 AM, Blogger Ron H. said...

"Ron, if your reservation wage is $10, and you heard about a job for minimum wage, would you even apply? Of course not."

Correct.

"Also, if your salary is $100,000, and you know the value of your work is worth at least $200,000, however, because of corporate rules, you can only get a small raise, would you be happy? No."

My judgment of the value of my work is quite subjective, and may differ considerably from my employer's judgment of it's value. :)

If I feel I am worth more, I'm free to look for an employer who recognizes my true value..

"How many people, including teenagers, aren't working because the pay is too low? I bet, it's quite a few. They're better off living with their parents or starting college.

"Too low" is highly subjective also, and depends a great deal on one's needs. Teens living with their parents may not feel a need to work. It would be interesting to know how their parents feel about that. Besides, there are other important reasons for teens to get work experience besides the money.

Generous and seemingly unending unemployment benefits can also affect one's perception of what is "too low", I suppose.

I think many teens would live with their parents for life if they could. I thank God every day that my parents wouldn't allow such nonsense. My children do too - I think.

"Moreover, there are firms that lay off higher quality and higher paying workers and replace them with younger and lower quality workers just to save money, although the quality of their products take a nose dive."

You are referring to these firms in the past tense, I assume, as they may no longer be in business.

"Furthermore, a firm may be better off without some poor workers willing to work for rock bottom wages."

I guess the firm in question would have to make that judgment themselves. I don't think you or I should make it for them by raising the minimum wage. What would you tell those workers now that they are unemployed? That you thought it was for the best?

Peak, we mostly agree on this. Is your point that a minimum wage is a good thing, and that higher is better for some reason? If so, I would ask why not just set minimum wage at $30/hr? If you find anything wrong with that amount, you must find the same thing wrong with $7.25.

 
At 6/03/2010 3:04 AM, Blogger Ron H. said...

Say, wheres Benny? I'm surprised he hasn't invoked Milton Friedman and his excellent discussions of minimum wage.

 
At 6/03/2010 3:17 AM, Anonymous grant said...

PT?
Companys also lay off older very well qualified workers when they believe that they are past there use by date because they have not kept up with changing technology and systems. They then look for a new graduate who they think will serve them better with the latest knowledge in the field they are in.

 
At 6/03/2010 8:29 AM, Anonymous Anonymous said...

I wish the law had that for every increase in the minimum wage, a corresponding decrease in anti-poverty spending had to occur.

Excellent.

 
At 6/03/2010 8:40 AM, Anonymous Hydra said...

Peak, we mostly agree on this. Is your point that a minimum wage is a good thing, and that higher is better for some reason? If so, I would ask why not just set minimum wage at $30/hr? If you find anything wrong with that amount, you must find the same thing wrong with $7.25.

Isn't this essentially the same argument I have made with respect to the Laffer curve and minimum taxes?

At issue is when is "everybody" better off.

Are we better off having everyone who can marginally perform at something working all day for a wage they can't survive on, or are we better off just to triage the worst of the worst and pay the rest enough to get by? If they are better off living at home or going to college, what's wrong with that?

Are we always better off with lower taxes, or is 0% to little?

How do we find the peak for these curves?

 
At 6/03/2010 8:43 AM, Anonymous Hydra said...

It would be interesting to know how their parents feel about that.

Well, there is no government regulation that says they cannot kick them out, and some do.

 
At 6/03/2010 8:54 AM, Anonymous Hydra said...

I can't imagine an employer turning over their staff frequently if they were paid off book and under minimum wage.

If you have legal employees,they are a deductible expense. If you pay them off book they are not. They have to be willing to work quite a bit under the minimum wage to make this really pay.

Then there is the little problem of how you do the acounting for people "off book". That money is going to disappear, somehow, when otherwise it would appear as profit. Then you have an IRS problem.

And you are right: with big turnover you pretty soon get a bad rep.

A local fellow is constantly advertising for a personal assistant/secretary. I knew a couple of people who worked for him - for a day or a week. For what the ads cost him he could probably afford to pay more, but I'm not sure it would make a difference.

 
At 6/03/2010 9:10 AM, Blogger juandos said...

"Entrepreneur Johnny Jiang, who owns a plastics factory in Dongguan, says workers used to be too frightened to make demands. Now, they'll walk out if he doesn't boost pay"...

Oh my! You just gotta love that two way street part of capitalism...

Thanks for the news item PT...

Even the New York Swine found Chinese hiring shortages worth reporting on...

 
At 6/03/2010 9:19 AM, Blogger Bill_C said...

Purely anecdotal on my part but my college student daughter has had no luck finding a second job this summer. She competes in a service job for hours with workers that are full time. Our friends teenagers that have found work report low weekly hours.

 
At 6/03/2010 12:26 PM, Blogger sethstorm said...


sethstorm, did I mention that what you are recommending is illegal and unconstitutional?

Then fine enough if you consider it so(never mind what parts you are talking about).

By all means just make it a condition of any sale in the future(where they are otherwise free), such that all requirements do not interfere with the Constitution.

It is my belief that when you show such an opposition to the policies of a particular government(e.g. Wynn and his wish to uproot to Macau), it is very difficult to not incur collateral damage on the citizens covered by said government. You want to oppose a particular government's policies? Go right ahead, but don't drag the governed in with the government.

 
At 6/03/2010 12:30 PM, Blogger sethstorm said...


Companys also lay off older very well qualified workers when they believe that they are past there use by date because they have not kept up with changing technology and systems. They then look for a new graduate who they think will serve them better with the latest knowledge in the field they are in.

That presumes a very inaccurate view of the situation. If they've kept up to date, and they still get canned - what of that? How huge of a loss of productivity does it have to be before they realize they just made a costly mistake?

 
At 6/03/2010 12:44 PM, Blogger sethstorm said...


Generous and seemingly unending unemployment benefits can also affect one's perception of what is "too low", I suppose.

However, it gets to a point where it's a political determination of who takes the sacrifice (or "hair-cut"). Offer the unemployment, and now you have to consider that they will not take much less than their unemployment. This is even more pronounced for lower wages - where it takes a lot less to get past 10% and that taking a 50% hair-cut is legally impossible.

 
At 6/03/2010 2:50 PM, Blogger PeakTrader said...

I stated above:

"A 41% increase in the median wage will certainly reduce employment substantially. However, a 41% increase in the minimum wage has an uncertain result on employment."

Perhaps, the minimum wage should increase until the (positive) wage effect equals the (negative) employment effect.

 
At 6/06/2010 3:07 PM, Anonymous Anonymous said...

Adults working for minimum wage often NEED to work because they have to pay rent and put food on the table. (Sure, SOME are secondary workers in their household, but it would be interesting to see the trend because I think the proportion of secondary earners working for minimum wage is trending downward.)

Teens working for minimum wage usually don not NEED the money. Sure, the income would be NICE but is not NEEDED.

So why would anyone want to displace breadwinners with teens?

 
At 6/06/2010 10:56 PM, Blogger Ron H. said...

(Sure, SOME are secondary workers in their household, but it would be interesting to see the trend because I think the proportion of secondary earners working for minimum wage is trending downward.)

Anon, I would like to see that too. Can you support that with something a little more concrete than a thought? A Labor Dept. reference would be nice.

"So why would anyone want to displace breadwinners with teens?"

Who is suggesting that? I would assume that breadwinners, on average, would be better workers, and would be selected over teens by employers.

 
At 6/11/2010 10:08 PM, Blogger Lorenzo said...

The point of high minimum wages is to stop young and other marginal workers from competing with established workers: it is about protection of incumbents, as regulations restricting market entry usually are.

 

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