Unexpectedly Intriguing!
July 8, 2014

From 2007 through mid-2009, the federal minimum wage was increased by over 40%. Combined with other minimum wage hikes at the state and local level and low inflation in the U.S. in the years since, there has effectively been no recovery for teen jobs in the United States:

Change in Number of Employed by Age Group Since Total Employment Peak Reached in November 2007, through June 2014

What increasing the minimum wage by so much did was to make the hiring of these least educated, least skilled and least experienced portion of the U.S. civilian labor force undesirable for U.S. employers, especially those who can only justify the hiring of teens if they can reasonably expect to cover their costs of employing them.

In essence, the minimum wage hikes from 2007 onward are directly responsible for creating structural unemployment in the United States, which is what we directly observe in our chart above. They would appear to have permanently displaced roughly 1.4-1.5 million Americans from the U.S. job market.

Faced with these kinds of artificially inflated costs for doing business, employers who might previously have been able to cover the cost of employing teens, including their costs for training them to do the entry level jobs they were willing to make available to them, were put in the position of telling ambitious teens seeking to gain employment experience and money to pay for things like a portion of their college education that they would not consider hiring them.

In fact, in states that have recently acted to boost their own minimum wages well above the current federal minimum wage level in the next several years, employers are already telling teens in those states to not bother applying for jobs:

Massachusetts Gov. Deval Patrick set the highest minimum wage in the country Thursday when he signed a bill that would lift the state’s pay floor to $11 an hour by 2017.

Massachusetts will reach the level—50% higher than the federal rate–in three steps of $1 increases. The new law supplants Vermont as the state set to have the highest wage floor. Legislators there earlier this month approved raising the state’s minimum wage to $10.50 an hour by 2018.

“Raising the minimum wage brings a little relief to the working poor, many of whom do jobs we could not live without and who recycle money right back into the economy,” Gov. Patrick said in a statement. “We show the nation that opportunity can and must be spread outward, not just upward.”

The bill passed the legislature despite opposition from the state’s restaurant association and other business groups.

“It’s extremely frustrating,” said Erin Calvo-Bacci, owner of Bacci Chocolate Design, a small candy maker in Swampscott, Mass. The company will no longer hire part-time high-school students to help during busy seasons because those workers lack enough experience to justify an $11 wage, she said.

The negative impact of minimum wage hikes on the employability of American teens could go a long way toward explaining what is perhaps the most negative aspect of what was otherwise hailed as a positive jobs report for June 2014: the disappearance of 93,000 employed teens from the U.S. work force from the previous month.

Is it a coincidence that the state of California, home to one out of eight teenagers in the U.S., was poised to hike its minimum wage to $9.00 per hour on 1 July 2014? It's almost as if the state's employers, in seeking to avoid having to lay off these most unskilled, uneducated and inexperienced portion of their staffs from summer jobs a month after they might otherwise have hired them, just simply didn't bother hiring teens at all to avoid the expenses of firing them a month later.

Isn't that the kind of negative feedback that would then discourage teens from even seeking jobs in the first place? And isn't that also the kind of thing that would ultimately lead the number of employed teens in the entire U.S. to fall, given that California is home to the largest share of that population?

After all, even with such a supposedly improving economy, the number of teens with jobs in California through May 2014 has already fallen from the previous year. And most of the decline has been since the beginning of this year, which is when employers in that state would begin shaping their hiring plans for the middle of 2014.

But now, we're past the actual implementation of that specific minimum wage hike affecting one out of eight U.S. teens, so we'll see how California's data and the national data evolve after the fact.

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