NCPA - National Center for Policy Analysis


June 11, 2008

The hike in the minimum wage passed by the Democratic majority in Congress last year is a big reason teen joblessness is at its highest level in 60 years, says Investor's Business Daily (IBD).  Americans are now finding out the true cost of the minimum wage increase as the unemployment rate shoots up.

Wall Street was stunned when the U.S. jobless rate jumped to 5.5 percent in May from 5 percent in April.  It seems the problem was that hundreds of thousands of youths poured onto the job market at the same time, thanks to the end of the school year.  Many, if not most, won't find jobs; they've been priced out of the market, says IBD.


  • The minimum wage was hiked 14 percent to $5.85 an hour last July.
  • Next month, it will go up an additional 12 percent to $6.55 an hour.
  • In July 2009, it's slated to rise 10.7 percent to $7.25 an hour.

If that sounds like a lot, the actual cost is much higher after you fold in taxes, benefits and Social Security that businesses pay on behalf of young workers, says IBD.

Economist David Neumark of the University of California, Irvine, has found a 10 percent minimum wage hike cuts employment of young, unskilled workers by 8.5 percent.

Employers forced to shell out an added 40 percent over three years to employ the least educated, least trained and overall least productive workers are finding a good reason not to do so -- unless it's absolutely necessary.

Young people should get paid more only after they work a while, gain some experience and actually become valuable to their employer -- rather than having higher pay mandated by the federal government, says IBD.

Source: "Mean To Teens," Investor's Business Daily, June 09, 2008.


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