NCPA - National Center for Policy Analysis

Who Does the Minimum Wage Hurt? The Young

January 8, 2015

Proponents of the minimum wage routinely tout studies showing little, if any, impact on employment from minimum wage increases, concluding that wage hikes have no negative effect on employment. This is something that NCPA Senior Fellow Richard McKenzie debunked in a recent study, explaining that employers can respond to wage hikes in other ways -- often by cutting fringe benefits and increasing work demands.

Moreover, Stephen Moore, chief economist at the Heritage Foundation, says that analyzing overall employment after a wage hike can mask the negative impact that minimum wages have on youth employment. He explains:

  • Just 4.3 percent of all hourly workers (and hourly workers constitute 59 percent of the American workforce) earned at or below the federal minimum wage of $7.25 in 2013. 
  • About 2.5 percent of all American workers earn the minimum wage.
  • Nearly 20 percent of hourly teenage workers in 2013 earned the minimum wage. Many teenagers earning above the minimum wage previously earned the minimum.
  • Teenagers are only 5.4 percent of the U.S. workforce but are one-quarter of minimum wage earners.

Wage hikes hurt teenagers because they are generally the least-skilled workers in the labor force. Employers, forced to pay higher wages, may not see teenagers' skills as worthy of such pay. Moore notes that while a wage hike may have a seemingly small impact on employment overall due to the few workers who earn the minimum wage, it has a much larger impact on youth:

  • From 2009 to 2013, labor force participation among teenagers in eight with an $8 or higher minimum wage was 35.6 percent, and teenage unemployment was 27.2 percent.
  • Among 31 states without minimum wages above the federal minimum, the labor force participation rate was higher (39.5 percent) and the unemployment rate was much lower (21.3 percent).

Source: Stephen Moore, "Young Workers Hurt Most by Minimum Wage Hikes," Daily Signal, January 6, 2015.                                               

 

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