The Looming Teen Unemployment Crisis

June 20th, 2011 at 1:32 pm | 21 Comments |

| Print

We’ve seen the number 9.1 a lot recently. It’s a gruesome figure — one that marks the prolonged and deep economic tragedy gripping our nation. However, sales not much attention is given to the near 25 percent rate of teenage unemployment (around 40 percent among African-Americans).

Our national conscience is not as readily concerned by this figure. They aren’t breadwinners. They aren’t on their own. They aren’t adults adding to America’s welfare rolls. However, site the problem of teenage unemployment, pilule if not addressed, will produce disastrous long-term consequences for the productivity of our economy. Moreover, the problem is particularly glaring due to the availability of its remedy — a permanent reduction in the minimum wage for teenagers.

Of the 1.1 percent of Americans on the minimum wage, teenagers are five times more likely to earn the minimum wage and they comprise over fifty percent of total recipients. They are inexperienced workers taking first-time or part-time entry-level jobs.

Many argue that a minimum wage overprices the labor of these teenagers: a young, inexperienced worker who can add only $3 or $4 of value per hour can’t be paid a minimum wage of double that.

However, many supporters of minimum wage laws claim this is just a problem in economic textbooks and not actually in the real world.

Nevertheless, the statistics seem to support that the latter claim also happens in practice. Countless studies (such as recently Even & Macpherson or Neumark & Wascher) have shown that an increase in the minimum wage leads to increases in low-skill level unemployment. These studies found “overwhelming” evidence of the negative connection, particularly regarding minorities.

The problem of increased teenage unemployment extends beyond the monetary value of a paycheck. Teenage years contain vital opportunities to harness skills that will later translate in the full-time work force: meeting deadlines, working with co-workers, dealing with a boss, etc.

The cultivation of these traits has tangible impacts. For example, researches at Stanford concluded that those who do not work as teenagers have lower long-term wages and chances of employment even after ten years. What seems like an inconsequential lost summer for a sixteen year old translates to protracted difficulty and a greater later dependency on the same minimum wage that created the cyclical process.

The federal government, with the interests of future generations in mind, should permanently lower the minimum wage for those 16 to 19. Their current exemption on the books provides that for only 90 calendar days (or until a 20th birthday) teenagers can be paid $4.25 – but this is often overpriced, difficult to apply for, and many times irrelevant because states don’t also include the provision.

Before concerns arise that this change in policy will harm not only adults, but also younger Americans 20-24, it’s important to underscore the nature of teenage employment. These are temporary, part-time, basic jobs – not in the same pool as full-time, career-oriented adults. This is reflected in the vastly higher propensity for teenagers to be on the minimum wage.

Moreover, this law will have little impact on twenty-somethings trying to enter the labor market full-time at ground level. According to the Labor Department, two-thirds of all minimum wage workers get a raise within a year. The reason for the latter fact is that businesses want to cultivate and keep talent, even with first-time jobs. Teenagers, constrained by high school and truancy laws, can’t immediately compete with committed, older workers.

The prospect of working, even at a lower wage, is vastly more desirable to teenagers currently being priced out of the chance to do so. To address this deficit of opportunity, a teenager’s labor value must reflect its true market value to a greater degree.

Teenage unemployment is the worst kind of crisis — hidden yet immediate. If we hope to keep the well being of the next generation in mind, minimum-wage reform, even if only in the limited range of teenagers, must happen.

Recent Posts by Harry Graver



21 Comments so far ↓

  • Smargalicious

    Harry, as a small businessman, I can tell you that hiring teens and young adults nowadays is very difficult.

    Some applicants only want to be paid under the table. Some say they don’t have the time to come in for an interview. And some tell me they have “things to do.”

    “I go out on Friday nights,” one told me. “So I can’t come in before 2 p.m. on Saturday.”

    So, based on experience, I have four part-time positions occupied by workers over the age of 55. They are reliable, have a decent work ethic, and are trustworthy. Instead of hiring more people I just give these employees more overtime.

    Want to see what I have to choose from today? Just go into any public high school in a major city and observe.

    • PracticalGirl

      Just curious: How does a part-time worker qualify for “overtime”? Do you regularly work your part-time employees over 40 hours a week?

      • Smargalicious

        Overtime is needed when production goes up; I have the option of giving them overtime but also knowing they were hired as part timers gives us all better choices.

        • D Furlano

          Your an idiot. You can’t find you way out of a paper bag never mind run a business.

    • jo.newman

      “Want to see what I have to choose from today? Just go into any public high school in a major city and observe.”

      You nailed it, Smargalicious. The character development public schools teach is horrible. Teens today are some of the most irresponsible, ungrateful, vain and lazy people being produced “to the benefit of the future”. Yeah, right.

      I was raised by both my parents (never taking a step into a public school), and one thing they taught me was if ever I wanted to be paid for doing work, I had to make sure that I would raise at least enough money for my employer to pay me AND them for giving me the job. Teens don’t even care to think of others…they just work for themselves.

      Also, I was told that if I didn’t have the ability to raise enough money I would have to apprentice, for free, until I learned how to get the job done on my own.

      Teens should get jobs and not be paid until they know how to do their job well. Maybe that will motivate them to work harder? But that’s hard to say when most teens are very lazy and have high wage expectations.

      The best way to get a teen to understand what it will take for him to earn a living and work hard is to have him start a business. All schools should give a class assignment like that! That would be a good dose of reality/adulthood for them.

      http://www.startingyourownbusinessovernight.com/entry-level-employment-01.html

    • Larz99

      You guys watch too much MTV. You’re just making stuff up.

      Seriously, why don’t you just say, “Hey you kids get off my lawn!”

  • PracticalGirl

    Some interesting concepts and some flawed logic.

    First- the teenage unemployment crisis isn’t the result of minimum wage. It’s a result of un-and-underemployment within the older ranks, who are in larger numbers than usual taking these positions as a way to pay/supplement their bills. And perhaps I’m the first to tell you this, but there are also large numbers of college graduates out there who are taking minimum wage jobs to keep making their installment payments on their student loans.

    Solve the lack of jobs for adults, solve the teen unemployment problem.

    Second, and I tread gently here as I go back to the college question. I see you are at Yale, and I wonder if your tuition is parent-provided. No defenses up- my son gets a full ride, courtesy of Mom and Dad. But many, many kids don’t have this privilege and use the money they make from part time jobs (some taking them as early as 13 years old) to help save and pay for school.

    Do you know any of these kids? Just asserting that your idea won’t hurt 20-24 year olds doesn’t make it so. Imagine how much more difficult it would be for the self-funders (or heck- just ask them) to make any significant impact on the average college costs if they’re making half or less than half of what they do now for a period of 2-4years, all for doing the same job.

    • KRH67

      Practical,

      Reading the post and your response I find myself at kind of a mental block, you both make valid points. Basically, you argue that the 75% who DO have jobs will be hurt by having their wages cut roughly in half, meanwhile his argument is the 25% who dont are hurt even more, because they have nothing.

      I question though how much teens can actually finance their college in today’s higher education environment, however. Teens can only work summers, almost never make more than 8 bucks an hour, and some states have laws on how many hours they can work before 18. I cant imagine the mean summer income for teenagers is much more than $2000. When you consider how ungodly expensive college is, it is simply unreasonable to expect teens to be able to pay their way through college with such jobs. Loans are inevitable no matter what, so wouldn’t it be better to throw the truly desperate no-income kids a rope?

      I dont truly have an answer to that, just thinking through the other side.

      • PracticalGirl

        Most of the kids that I knew who worked to help save for college didn’t just work in the summers- they also worked after school and on the weekends as well, and most of them did this from their freshman summer (or earlier) on. A lot of the jobs the teens I know take also have tips involved, making their take-home much better than the minimum. Hostess jobs at restaurants and, in the Northwest, coffee stands which are an ubiquitous part of the landscape. I know many young ladies who, after 5 years, headed of to their state universities with well over a year of tuition in the bag…And a skill that they took to their university town, got a job with, live cheap and are making it through.

        Even “only” $2000 a summer, for an enterprising and well-led teen, translates into $8,000-$10,000 in the bank before they ever set foot on a campus. Does it foot the whole bill? No way, but it gets them ahead of the game early. Can you make a dent in an Ivy League education like this? Again, no way, but the Ivies are a destination for the minority.

        As an aside and apropos of nothing: By far, the largest number of steadily working teens I know are girls. It was a very strange phenomenon to witness. Nearly all of my son’s female friends worked through high school. Very few of his male friends ever did.

        One last thing: You mention loans for college as inevitable, and over $100 billion of the nearly $250 billion spent on college every year is pay for exactly like that. Here’s the rub, though, and it’s something parents need to think about before mindlessly encouraging their kids to take on debt to go to school: Only 30% of Americans, by age 27, actually get their degree. That means that the chances of your freshman student getting his/her degree is almost the same as his/her chance of becoming a carrier/contracting an STD (25%)

        For many, different plans for after high school must be made before they ever take on debt.

    • danwjordan

      Practical makes an important point. For older teenagers who live with a stable family that provides for them, feeds them, and pays most or all of their bills, lowering the minimum wage won’t have too much of an impact, perhaps. But what about the teenagers who don’t have this kind of financial support from their families? Obviously, minimum wage doesn’t cover someone’s bills if they are living on their own, but cutting the minimum wage almost in half would just make it even more difficult for the less privileged teenagers to “work themselves out of poverty”. Think about what has happened with the proliferation of unpaid internships – the ones who get the most skills and experiences are the ones whose parents can afford to support them as they work full-time for free for a whole summer. A lot of teenagers don’t have that kind of luxury.

  • Rob_654

    There is a solution to teen unemployment coming right up.

    With the various states seeking to really crack down on illegal immigrants – there should be Farm Field jobs opening soon.

    All we need to do is get the teens who want work shipped out of these states and fields so that they can pick crops during the summer.

    This would be a win win.

    Farmers get the help they will need to replace illegals.

    Teens get a job and some money.

    Teens also get in shape and those are fat – won’t be after a summer.

  • JimBob

    Well we might try enforcing immigration laws.

  • jcm433

    How dare some punk from Yale lecture teenagers today for being reluctant to work for less than $7.25 per hour?
    Somebody asked earlier if Mr. Graver was on the “Parent-provided” college tuition plan. I know without having to ask that this is so. If it weren’t, Mr. Graver would most likely not be a Republican.
    He jests at scars, that never felt a wound.

  • Churl

    Forgetting the minimum wage, look here…

    http://www.dol.gov/whd/regs/compliance/childlabor101_text.htm#4

    …for a list of work that the Federal Government does not allow teenagers to do regardless of how much they are paid. Listed as well are regulations for hours and working conditions for young workers that do not apply to adults. Individual states may add yet more rules and restrictions.

    Whether or not you agree with the listed items, it rather narrows the range of allowable jobs.

    I can see where, given a choice of paying $7.25 per hour to an adult or to a teenager, many employers would opt for the lesser set of restrictions and hire the adult.

  • Rabiner

    “Many argue that a minimum wage overprices the labor of these teenagers: a young, inexperienced worker who can add only $3 or $4 of value per hour can’t be paid a minimum wage of double that.”

    Regarding minimum wage. You can’t eliminate minimum wage for minors and keep it for adults. You may ‘solve’ the unemployment of minors but now you’ve just relegated the 18-20 year olds to unemployment due to an inability to compete on a wage level with 16-17 year olds for unskilled jobs.

    This concept already occurs with work-study programs in America’s Universities. Those that qualify for work-study are at a huge advantage in obtaining employment during their college years versus students who do not qualify as the wage the student would earn is subsidized by the federal government. So a student who has work-study only costs the employer $4 an hour out of a $11 hour wage versus a student who does not qualify who costs the employer $10 an hour out of a $10 hour wage for the same position.

  • Rabiner

    Rob:

    “There is a solution to teen unemployment coming right up.

    With the various states seeking to really crack down on illegal immigrants – there should be Farm Field jobs opening soon.

    All we need to do is get the teens who want work shipped out of these states and fields so that they can pick crops during the summer.

    This would be a win win.

    Farmers get the help they will need to replace illegals.

    Teens get a job and some money.

    Teens also get in shape and those are fat – won’t be after a summer.”

    You’ve seen the working and living conditions of produce pickers? I don’t think many parents are going to encourage their sons and daughters to go halfway across the country to live in substandard living quarters for low wages, and a high occurrence of employer exploitation for a summer job.

  • Bunker555

    Where is everybody? Probably watching Keith Olbermann’s Countdown premiere on Current TV.

  • yalefail

    The (looming) teen unemployment crisis is certainly real and something that merits discussion. However, it seems that Mr. Graver’s views are somewhat elementary and narrow-minded.

    The teenage unemployment crisis is likely not caused by minimum wage issues, but rather by the large numbers of unemployed adults infiltrating market sectors in which teenagers typically work. This also runs into the issue of underemployment; that is, adults with substantial work experience and/or advanced degrees are discouraged by the current economy and seek work for which they are overqualified. They are the ones robbing teens of jobs—not the minimum wage.

    As Harry cites, countless studies, namely Even & Macpherson, have shown that an increase in the minimum wage leads to increases in low-skill level unemployment. While this study is certainly valid, it is done under specific conditions and cannot be used to determine the effects of changing the minimum wage in all cases. The textbook argument for this relationship proceeds as follows: roughly, lower wages lead to a lower price level. As a result, the real money supply rises and consequently liquidity rises, as well. People move to make use of their newly gained excess liquidity and interest rates go down. This ultimately leads to an overall increase in demand (which requires more employment to facilitate production).

    How does the preceding logic change if we’re stuck in a liquidity trap, with short-run interest rates at (near) zero percent? In the current economy, the Federal interest rate is approximately 0.37%. I will concede that this is not zero, but precise definitions of a liquidity trap vary. Either way, we are near a liquidity trap, at the very least. But what is the problem with this? In order for the textbook explanation of minimum wage-employment level interaction to hold, interest rates must fall to spur the increase in demand. When Federal rates are already this close to zero, this is a lot to ask from the economy, and even something that might be impossible. Interest rates simply do not have enough traction at this level.

    Getting back to empirical evidence you cite in your piece, the research ongoing at Stanford seems to result in more of a correlation rather than causation. However, it is difficult to say with certainty because I wasn’t able to read the piece (you didn’t cite it). Those who do not work as teenagers may have lower long-term wages because of internal factors (drive, ambition, work ethic, etc.), not necessarily because of external factors (work experience on an application, tangible office skills, etc.).

    This “protracted difficulty” you believe exists implies causation; the lack of a summer job for a sixteen year old statistically suggests more difficulty finding work later on but does not directly cause it. For example, Bill does not get a job the summer after his sophomore year of high school, but we know from past experience that he would likely have been rude to his boss/customers and show up to work late. Now, when Bill seeks work two years later, he is again denied a job. It is plausible to say that he did not receive an offer because someone picked up on these tendencies during an interview and not because Bill lacked the necessary work experience for the job. In this case, one could misconstrue his not finding a job as being a result of inexperience and the labor cycle. This is certainly not always the case, but it is something to keep an eye out for before making broad, sweeping claims about statistics, as Mr. Graver does.

    I am in agreement that the teen unemployment crisis is real and needs to be fixed. So, what is the proper course of action? Rather than lowering the minimum wage, solve the adult labor market woes, and that should solve the teen unemployment issue along the way.

  • Houndentenor

    You get what you pay for. If you are paying the lowest wage allowed by low, you are going to get the least qualified and least motivated employees. If you do get good employees they will bail for more money. That’s not disloyalty. It’s just basic economics. So whenever I hear someone who owns a business complaining about the quality of people they can hire, I know I am talking to someone who wants the cream of the crop for bargain basement wages. It doesn’t work that way. You’d think they’d understand that, but they obviously don’t.

  • sshhaazz

    Wow. I was looking for an article to support the fact that it is NOT my 16 year old’s fault that he cannot find summer employment, despite the fact that he has been looking since February. This is a teen who has been volunteering for years, at nursing homes, a hospital and a local community group. Does beautifully in school. Many of the places he applies to now have adults working at jobs similar to those my friends and I held as teens. A few of these comments are offensive. Not all teens are irresponsible, ungrateful, vain and lazy. In fact, so many are in bad situations, parents laid off, underemployed, etc and desperately seeking part-time employment to pay for items such as school supplies and toiletries. I am very afraid for my children and their futures.

  • USA: “We Are the 99%” |

    [...] 20.9%; 20.2% for Latinos; and an incredible 44.8% for blacks. Read more about teenage unemployment here and about the racial divide when it comes to employment [...]