High Minimum Wage Robs Young People of Summer Jobs
by Eric Montague, Policy Analyst
July 2002
Washington state is suffering through difficult economic times. Our unemployment rate, which topped 7% in May, is one of the highest in the nation. Unemployment figures like this have not been seen since the recession of the early 1990s, when the jobless rate regularly exceeded 6%. Some counties, like Skamania and Cowlitz, are approaching 10% unemployment. In Klickitat county nearly 14% of people who want to work cannot find a job. In the Puget Sound region, long the economic engine of the state, more than 6% of the population is jobless.
The increasing jobless rates are a reflection of the economic troubles facing our state. Young people are especially hard hit. Teens between the ages of 16 and 19 are finding it more and more difficult to find a summer job. A look at the teen jobless rate shows that, after a dip to just below 13% nationally in the summer of 2000, the rate climbed back up to nearly 18% this year.
Although the teen jobless rate is not tracked in Washington state, anecdotal evidence mirrors the national trend. Teens who last summer were able to find jobs with a few phone calls are now filling out twenty or thirty applications before even getting in the door. These stories are from teens with previous job experience. Young people who didn't have a job last year are finding it even harder to gain their first employment experience.
These statistics raise questions about what factors contribute to the rising jobless rate among young workers. The answer is complex, but perhaps the most obvious contributor to youth unemployment is Washington's high minimum wage, set by law at $6.90 per hour and now indexed to Seattle's cost of living.
Nationally teens make up 6.8 million, or about 5%, of the 135 million strong workforce. This young workforce is the largest demographic group making minimum wage. About 42% of all minimum wage workers are a dependent living with a parent or relative. When the minimum wage goes up, employers are forced to cut jobs to manage labor costs. More often than not, young workers making minimum wage are the first to go.
Simple economics and basic common sense informs us that when the cost of something goes up (the time of young workers), the demand for it goes down (fewer summer jobs). The high minimum wage is a government imposed price control, and when price controls artificially increase the cost of creating jobs, we should not be surprised that our economy produces fewer of them.
Washington Policy Center recently completed a study of the small business climate in Washington state. Business owners identified the high minimum wage as a major deterrent to hiring young workers. They said they couldn't afford to pay $6.90 per hour to an inexperienced young worker that will require extensive training. We found business owners are more likely to forgo hiring a new employee and instead ask more of existing employees.
The state's high minimum wage places an even greater burden on communities hardest hit by the recent economic downturn. In rural counties where jobless rates already top 10%, hiking the minimum wage based on the cost of living in big cities only makes things worse.
The impacts of the minimum wage on young workers are costly. Teens lose a chance to prove themselves, families that need extra money are forced to rely on government assistance and nearly 20% of young people are left jobless, looking for things to do -- and often left vulnerable to bad choices. The state should consider adjusting the minimum wage to exempt young workers, or to allow employers to offer a training wage to new employees. One thing is certain, without reasonable reforms, youth jobless rates will continue to grow and young, productive workers will be left without the job skills and work experience that is so vital to success in our society.
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