The Effects of Minimum Wage
This is a familiar argument, but given the attractiveness of government fiat, it seems it must be had again and again:
Three years after the passage of federal wage legislation, teen employment prospects are suffering tremendously. The unemployment rate for 16 to 19-year-olds remains above 25 percent; for those ages 16 to 17, the unemployment rate is close to 30 percent. While the recession has been a significant cause of teens’ employment woes, some advocacy groups have claimed that it’s the only cause — downplaying any employment loss caused by the more than 40 percent increase in the federal minimum wage that occurred over the same time period. …
Using state-specific variations in minimum wage growth, and carefully controlling for the effects of the recession and other state economic differences, Even and Macpherson are able to isolate only the decline in teen employment that was caused by the federal wage hike.
For the 19 states affected by all three stages of the federal wage hike, there was a 6.9 percent decline in employment for teens aged 16 to 19. This translates to approximately 98,000 fewer employed teens. Broadening the analysis to include all 32 states impacted by any stage of the federal wage increase, the authors find approximately 114,400 fewer employed teens.
Of course, teen employment is only one segment of the total entry-level employment pool, but it’s surely representative, and it’s particularly notable which subsegment is likely to be hardest hit:
When Even and Macpherson look specifically at 16 to 19-year-olds with less than 12 years of education, the proportional employment loss grows larger. In states impacted by all three wage hikes, there was a 12.4 percent decrease in teen employment.
Yes, this subsegment overlaps teens who are presumably still in school, but even so, they’re losing valuable experience in the workforce. The ripple effects in the economy are surely substantial, from increased responsibility for higher-level employees, decreased opportunity for employers to expand, and growing attractiveness of immigrant labor.