Training Wage Would Boost Teen Employment

July 11, 2014

Stephen Moore, chief economist at the Heritage Foundation, explains that many cities and states are making it harder for teenagers to find jobs because they are raising their minimum wages above the federal minimum.

Seattle has raised its minimum wage to $15 an hour, and nearly half of all U.S. states have raised their minimum wages above the federal rate of $7.25. While these increases are usually implemented in the name of "fairness," he explains, these policies only hurt young workers.

Even though there is a debate regarding the minimum wage's impact on low-skilled workers, the evidence of the minimum wage's impact on teen employment is clear.

  • When the minimum wage was raised in 2007 and 2008, the national teen unemployment rate almost doubled.
  • After these raises, black teenage unemployment increased to nearly 50 percent in 2009. This is an unemployment rate commonly seen in third world countries.
  • The teenage work-participation rate fell to 35 percent, a 10-percentage-point drop in just three years.

While the unemployment rate increased for everyone during the recession, the teenage unemployment rate rose more than it did for all other groups, because the government priced them out of the workforce.

People in jobs paying the minimum wage are not often supporting families with those wages:

  • Only one in every 20 workers earns the minimum wage, and very few of them are the primary income-earners in their household.
  • Most who earn the minimum wage receive a raise within six months in their jobs.

Labor economist Richard Vedder says that the best way to increase employment for teenagers is to allow employers to offer them wages that are below the current minimum. Moore suggests that a $5 minimum wage (he calls it a "training wage") for teenagers would allow more of them to get a job, become productive and learn valuable on-the-job skills.

Raising the wage to $10, on the other hand, will keep teenagers out of jobs, as they have almost no experience and are not worth the higher hourly pay.

Source: Stephen Moore, "Why Not Boost Teen Employment with a Training Wage?" Heritage Foundation, June 30, 2014.

 

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