July 30, 2010

The Effects of Minimum Wage

Justin Katz

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.

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72 years ago, FDR signed the minimum wage law, since then the Reight-Wingnuts have opposed every increase with false predictions of economic doom, In those 72 years, the American economy has grown to be the largest economy in the world.
Folks like Limbaugh and Gingrich, and many others on the Reight, have called for the abolition of the minimum wage.

They want the USA to be more like China or Vietnam, were folks earn 25 cents and hour. and Children are paid 7 cents an hour, or less.

Posted by: Sammy at July 30, 2010 12:34 PM

"They want the USA to be more like China or Vietnam, were folks earn 25 cents and hour. and Children are paid 7 cents an hour, or less."

Both Atheist Left "progressive" command side economies.
Starting to see the light?????

Posted by: Tommy Cranston at July 30, 2010 7:26 PM

China, is a now, a very capitalistic country, the folks on the Reight, would feel right at home there, no labor unions, no workers-comp, plenty of newly minted Billionaires, no Gay Pride Parades, no silly environmental regulations. THE FREE MARKET RULES IN CHINA, hardly a "progressive" country

Posted by: Sammy at July 30, 2010 8:47 PM

Sorry Stuart/Sammy but China is a progressive paradise. Atheist Left. Maoist. Free health care and abortions. Public schools only. Government runs everything behind (or not so behind) the scenes.
In short, a command side economics Atheist Left police state.
Just what you and you're ilk dream of.

Posted by: Tommy Cranston at July 31, 2010 7:52 AM

The unemployment rate for black males age 16-19 was about 40% in 2009. The people most harmed by disemployment legislation are exactly those who are already most disadvantaged in hiring decisions. The minimum wage, like unionization, has always been a plan to give security to the haves by keeping the have-nots out.

Posted by: Mario at August 1, 2010 8:36 AM
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