Minimum Wage and Teen Unemployment

The other day, when criticizing an incredibly facile minimum wage analysis in the Arizona Republic, I had meant to observe that since minimum wage jobs are such a tiny (1.5% if include jobs that work for tips) portion of the workforce, one should look at more targeted metrics to assess the effect of minimum wage hikes, such as teen employment.

Kevin Erdmann has such an analysis.  He observes, "Is there any other issue where the data conforms so strongly to basic economic intuition, and yet is widely written off as a coincidence?"

Note that there is still some danger, as I wrote before, in measuring employment effects from the implementation date. Businesses plan ahead an many job losses may be occurring between the announcement and the implementation date.  I know we have made all the job cuts we plan to make in response to California minimum wage increases six months ahead of the actual date the wage takes effect.

Update:  The charts are obviously far from a smoking gun.  That is the nature of economic analysis.  In complex and chaotic multi-multi-variable systems, controlled studies are almost impossible and direct correlations are hard to find, and even when found may be coincidence.  As an employer who hires a lot of summer seasonal employees in parks, I would obviously be a natural employer of teens.  But I no longer do so, and it is important to understand that wages are only a part of the equation.  Another major issue is one of liability.  Increasingly, the legal system makes the employer liable for any action of their employees, no matter how boneheaded or how much the action is against all policy and training.   I have enough trouble with employees that have years of good work history -- I am not really excited about taking a chance on an unproven 17-year-old.

  • alanstorm

    I'm sure the fact that some union contracts have wage rates tied to the minimum wage has NOTHING to do with the Democrat's pushing of this lunacy.

    Completely sure.

  • Granja
  • MingoV

    Minimum wage increases are far bigger problems for businesses than most of the ignorant advocates know. Here's an example from my field of lab medicine.

    Five new phlebotomists are making minimum wage. It rises.
    The ten experienced phlebotomists now are making the same as the newbies. They get a pay raise.
    The medical technicians are barely making more than the experienced phlebotomists. They get a pay raise.
    The medical technologists are barely making more than the technicians. They get a pay raise.
    The same for the assistant supervisors and supervisors.
    Only the administrators and the medical director (me) did not get a raise.
    The total cost of this minimum wage pay raise was enough to almost eliminate our less than 2% margin. And most of our charges were fixed because of contracts with insurers or dictated reimbursements by Medicare and Medicaid.

  • kwheel

    Excellent post. Political Calculations has a lot of posts regarding teen unemployment and a very good demand curve. It puts some numbers behind the story.

  • Craig Loehle

    I have heard the argument that companies are making record profits, so they should share more with employees. This treats all companies as if they are part of the profitable big companies in the Fortune 500 (not all of even the 500 are profitable...). But hundreds of thousands of small businesses are NOT making record profits and will have to close if their labor costs go up. Even individual stores of profitable brands can close because not all of them are doing so great. We can discourage smoking by adding a tax and discourage oil use by raising prices but raising the price of labor has no effect? Really?

  • FelineCannonball

    There is a 90 day teen exemption in the federal minimum wage. That pretty much means $4.25 is the teen minimum wage for high school summer work in over half the states. Except agricultural or tip-based jobs where you can pay them less.

    I'm thinking lack of jobs is the main reason for low teen employment.

  • http://devilish-details.blogspot.com/ mesaeconoguy

    The left is trying to do to economics what it did to science, with the AGW farce.

  • dmon

    You guys are kidding, right? Nobody thinks teen unemployment has any correlation to illegal immigration? 40 years ago, I worked all sorts of minimum wage jobs for an employment contracting firm called Manpower. I also worked fast food jobs, warehousing jobs, delivered papers, you name it. Nowadays, at least in southern Cal, all that has disappeared. All of the local McDonald's are staffed by Mexicans. For any sort of casual labor, people just go down to Home Depot and pick up the Mexicans waiting outside. Not saying they're bad workers, or evil or anything (although LA has legendary gang problems). Just saying you guys are talking about teen unemployment entirely in the context of minimum wage, when there's a much bigger elephant tromping around the living room.

  • marque2

    And the diet farce. Diet and nutrition science is worse than climate science.

  • marque2

    Really? I don't think so. But thanks for playing. I can't believe this post anything and see if it sticks philosophy of the left.

  • FelineCannonball
  • marque2

    Thx - I guess youth can have jobs for 90 days - as long as the employer doesn't find that causes more pain than it is worth.

    Sorry still a big goose egg. Thx for playing.

  • marque2

    I wonder how an employer is suppose to ask if you are under 20 during the interview as well with all the age discrimination laws - and I do recall Warren complaining that the paperwork for training wagesnwas so cumbersome to not be worth it.

  • FelineCannonball

    There are plenty of other reasons not to hire teens but as of the latest BLS report 408,000 teens are legally hired for less than the federal minimum wage. Mostly in the food service industry. This stuff matters for for people filling trainee, summer, seasonal, and high turnover jobs.

  • marque2

    Its all good then. There isn't a problem.

  • FelineCannonball

    ??

    only addressing a few facts. I'll leave the analysis for others.

  • marque2

    Like the fact that it is near impossible for anyone to hire a teen at below minimum wage, despite your "evidence?"

    Or the facts that show drops in teen employment whenever you have a minimum wage increase?

  • FelineCannonball

    fourth column, third row: http://www.bls.gov/cps/minwage2011tbls.htm

    And here's a little more sophisticated analysis on long term trends. Correlation = causation is a start, but digging deeper usually give more rewards. http://www.cepr.net/documents/publications/min-wage-2013-02.pdf

  • mlhouse

    1. No matter what the libertarian audience in this forum believe, the minimum wage is not going to go away. The vast majority of the public believe that it is a "fair" policy that helps low wage earners. Policies or repeals of policies that are seen as being "unfair" cannot be repealed because fairness is a major driver of the American electorate. However, reform of these sacred cows is possible if the reforms are seen as being fair.
    2. The teenage min wage is a very important reform that could be done politically. Lowering the teen minimum wage to $5/hour for workers under the age of 19 and working less than 20 hours per week would be a start. I would couple this minimum wage with a repeal of the total FICA taxes paid for these employees.
    3. Likewise, I would repeal the FICA taxes on workers making between the current minimum wage and the wage that the liberals think should be the minimum (around $10/hour). This would increase the take home pay for these workers significantly, while at the same time, making these low wage workers more competitive against their higher paid (and theoretically higher producing) competition.
    4. This is a win-win-win all around. Allowing employers to pay a low wage for the young, entry level workers under 19 increases their employment, improves their future earnings because of this work experience, has many social ramifications as teens are now gainfully employed rather that causing trouble, and also improves the quality of these mainly service level products that these types of workers are usually employed. Each McDonalds should have one or two more young employees working each shift to keep the premises clean, the garbage emptied, and make the process faster and more efficient.

  • http://devilish-details.blogspot.com/ mesaeconoguy

    So you’ve confused simple averages with what businesses actually do.

    Don’t feel bad – this is how and why shitty legislation gets built.

    How Is Column 4 determined?

  • FelineCannonball
  • http://devilish-details.blogspot.com/ mesaeconoguy

    If you drill down, which is easily done on the bls site, you will find the majority of workers under 25 are at or above minimum wage (53.2 vs. 46.6)

    http://www.bls.gov/cps/minwage2011tbls.htm#7

    Given your past history of idiocy, I recommend you take over the Obamascare website development team.

  • FelineCannonball

    The percentage runs vertically. 77 percent of 16-19 year olds get paid above minimum wage.

  • Anthony J. Alfidi

    Minimum wage increases can launch a wage-price spiral that leads to hyperinflation: http://alfidicapitalblog.blogspot.com/2011/12/washington-state-opts-for-wage-price.html