Bush, Pelosi, and Reid Deserve Scorn for Destroying Jobs for Teenagers

Anybody with an IQ above room temperature understands that companies only hire workers when they expect to generate net revenue (i.e., the total receipts associated with a new worker are expected to be higher than the total costs). That's why it was so reprehensible for Congress to approve a 40-percent hike in the minimum wage - a step that was guaranteed to kill jobs. The Wall Street Journal's editorial page reports on new research showing 100,000-plus jobs were wiped out. This awful legislation was approved in 2007, and all politicians associated with that choice should be ashamed of themselves.

Economic slowdowns are tough on many job-seekers, but they're especially hard on the young and inexperienced, whose job prospects have suffered tremendously from Washington's ill-advised attempts to put a floor under wages. In a new paper published by the Employment Policies Institute, labor economists William Even of Miami University in Ohio and David Macpherson of Trinity University in Texas find a significant drop in teen employment as a direct result of the minimum wage hikes. The wage hikes were implemented in three stages between 2007 and 2009, and not all states were affected because some already mandated a minimum wage above the federal requirement. But for the 19 states affected by all three stages of the federal wage increase, "there was a 6.9% decline in employment for teens aged 16 to 19," write the authors. And for those who had not completed high school, "we estimated that the hikes reduced employment by 12.4%," which translates to about 98,000 fewer teens in the work force. After isolating for other economic factors and broadening their analysis to include all 32 states affected by any stage of the federal wage increase, the authors conclude that "the federal minimum-wage hikes reduced teen employment by 2.5% translating to approximately 114,400 fewer employed teens."

Video Explains Why Government-Imposed Minimum Wages Are Wrong

A former intern of mine does a very good job of showing how minimum wage laws cause joblessness in this new video from the Center for Freedom and Prosperity.

Bush's Minimum Wage Increase Killed Jobs

In addition to being in favor of more spending, increased regulation, bailouts, and protectionism, President Bush also saddled the economy with a big minimum wage increase. A new study shows that this pernicious policy has destroyed more than 500,000 part-time jobs. One of the most interesting insights in the report is that the economy (prior to Bush's awful law) had reached a point where the minimum wage wasn't doing much damage because the competitive wage for entry-level work had risen about the government-mandated minimum. But by boosting the required wage by 14, 12, and 11 percent over three years, that is no longer the case. As a result, hundreds of thousand of people have been priced out of the job market.

Economic theory is clear in its understanding of the minimum wage – it unambiguously reduces the demand for labor, but only if the minimum wage is above the market wage for unskilled entry level labor. In practice, the minimum wage has been far beneath the going wage for unskilled, entry level workers. Increasing the minimum wage at these levels would have no effect on employment or wages. As a consequence, research findings have ranged from zero to modest job losses as the minimum wage increases. Unfortunately, the latest round of minimum wage increases, which occurred in late July 2007, 2008 and 2009, occurred from the peak through the trough of the recession. These increases were, at 14, 12 and 11 percent respectively, the largest since 1978 and the largest three-year percentage change since 1950. ...the minimum wage increase accounts for roughly 550,000 fewer part-time jobs now than would otherwise be the case without the most recent three minimum wage increases. ...Abandoning the minimum wage would have little or no adverse economic effects. Indeed, it would most likely boost employment.

Real Story on Minimum Wage Is that Unions Are Intentionally Harming Teenagers

The Wall Street Journal rightfully complains about government-imposed minimum wage laws, which are causing higher levels of teenage unemployment. But an underappreciated aspect of this story is the role of union bosses. The unions are big advocates of higher minimum wages, ostensibly because they want to help the working poor, but the real reason is that unions want to somehow acheive above-market wages for their members, and it is difficult to achieve that goal if employers have other options. But if unions can increase the cost of hiriing other workers - or if they can price them out of the market with minimum-wage laws, then that helps the union bosses negotiate favorable deals. Regardless, the real victims are the hundreds of thousands of teenagers who are now jobless:

Yesterday's September labor market report was lousy by any measure, with 263,000 lost jobs and the jobless rate climbing to 9.8%. But for one group of Americans it was especially awful: the least skilled, especially young workers. Washington will deny the reality, and the media won't make the connection, but one reason for these job losses is the rising minimum wage. Earlier this year, economist David Neumark of the University of California, Irvine, wrote on these pages that the 70-cent-an-hour increase in the minimum wage would cost some 300,000 jobs. Sure enough, the mandated increase to $7.25 took effect in July, and right on cue the August and September jobless numbers confirm the rapid disappearance of jobs for teenagers. The September teen unemployment rate hit 25.9%, the highest rate since World War II and up from 23.8% in July. Some 330,000 teen jobs have vanished in two months. Hardest hit of all: black male teens, whose unemployment rate shot up to a catastrophic 50.4%. It was merely a terrible 39.2% in July. The biggest explanation is of course the bad economy. But it's precisely when the economy is down and businesses are slashing costs that raising the minimum wage is so destructive to job creation. ...The current Congress has spent billions of dollars—including $1.5 billion in the stimulus bill—on summer youth employment programs and job training. Yet the jobless numbers suggest that the minimum wage destroyed far more jobs than the government programs helped to create. Congress and the Obama Administration simply ignore the economic consensus that has long linked higher minimum wages with higher unemployment. Two years ago Mr. Neumark and William Wascher, a Federal Reserve economist, reviewed more than 100 academic studies on the impact of the minimum wage. They found "overwhelming" evidence that the least skilled and the young suffer a loss of employment when the minimum wage is increased. ...State lawmakers are also at fault. At least 10 states have raised their minimum wages above the federal level in the last decade, largely in response to union lobbying and in the name of helping the working poor. Four states with among the highest wage rates are California, Massachusetts, Michigan and New York. Studies have shown in each case that their wage policies killed jobs for teens. The Massachusetts teen employment rate sank by one-third when the minimum wage rose by 88% between 1995 and 2008.