Political  Calculations

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.

Political Calculations

Political Calculations is a site that develops, applies and presents both established and cutting edge theory to the topics of investing, business and economics.

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