Raising minimum wage is sure bet to create more jobless young Americans
Young workers are finding it increasingly difficult to enter the labor market, get their first job and work their way up the career ladder. Yet, during this time of persistently high youth unemployment, there have been calls to increase the minimum wage from $7.25 to as high as $10 per hour.
America's youth are having a hard time reaching the first rung on their career ladders. Now is a bad time to increase minimum wages and make that important step more difficult.
Higher minimum wages generate a tradeoff between higher wages for the employed and higher rates of unemployment. When minimum wages increase, many workers who earn less than the new higher minimum wage lose their jobs. Firms often decide that they can get by with fewer workers instead of paying higher wages.
As one might expect, David Neumark of the University of California's Irvinecampus and William Wascher of the Federal Reserve Board survey recent research on minimum wages and find that the least-skilled workers are hurt the most by minimum wages.
Minimum wages are particularly damaging for the future prospects of young workers as they typically earn the low wages that are impacted by the change in the minimum wage law.
In 2010, 50 percent of workers aged 25 and below, and 78 percent of teenagers earned less than $10 per hour. With youth unemployment topping 20 percent, it has become clear that employers are not willing to hire young workers at the current minimum wage, much less at an even higher one. It would damage the prospects of those willing but no longer able to work for wages below the minimum wage.
So in the short term, higher minimum wages make it difficult for young workers to find jobs. In the long term, higher minimum wages diminish the career prospects of young workers. Higher rates of unemployment mean that young workers do not have access to the resume-building activities associated with employment and do not gain the experience necessary to earn higher wages in the future.