Blackadder’s Lair

The home of many a cunning plan

Young and Unemployed

The New York Times had an editorial Monday arguing that Barack Obama ought to give attention in crafting his stimulus/public works program to the plight of teen workers. As the Times puts it:

Young people who fail to find early jobs are more likely to remain underemployed or unemployed into their 20s and beyond. The risks are compounded for low-income youth, who are more likely to leave school and have other problems when they do not find work.

According to a recent analysis by Andrew Sum, an economist at Northeastern University, the percentage of teens employed has fallen from nearly 45 percent in 2000 to about 30 percent today. That is almost 10 times the decrease for adult workers, who are increasingly taking jobs that once went to teenagers.

The situation is far worse in low-income minority areas, where the youth employment rate appears to be hovering not much above 10 percent. That will only get worse as the economy contracts. And even when the recession ends, it could take an additional two or three years before youth employment begins to recover.

More. Of course, one policy that likely contributes to teenage unemployment is the minimum wage. Here, for example, is a study David Neumark and Olena Nizalova on the long term effects of the minimum wage on the wages of those exposed to minimum wage laws as teenagers. According to the study:

The evidence indicates that even as individuals reach their late 20’s, they work less and earn less the longer they were exposed to a higher minimum wage, especially as a teenager. The adverse longer-run effects of facing high minimum wages as a teenager are stronger for blacks.

This would tend to corroborate the Times’ claim that employment helps teens “learn[] basic workplace skills and develop[] work histories that made them attractive to future employers,” and thus has benefits that go far beyond what’s included in a paycheck.

While we’re on the subject, here is another study, by David Nuemark and William Wascher, examining the different effects that the minimum wage and EITC have on employment for men and women. From the abstract:

For the minimum wage, the evidence points to disemployment effects that are concentrated among young minority men. For young women, there is little evidence that minimum wages reduce employment, with the exception of high school dropouts. In contrast, evidence strongly suggests that the EITC boosts employment of young women (although not teenagers). We also explore how minimum wages and the EITC interact, and the evidence reveals policy effects that vary substantially across different groups. For example, higher minimum wages appear to reduce earnings of minority men, and more so when the EITC is high. In contrast, our results indicate that the EITC boosts employment and earnings for minority women, and coupling the EITC with a higher minimum wage appears to enhance this positive effect.

In case you were wondering, here is the unemployment rate broken down by sex:

The last minimum wage increase was in July of 2008. It’s due to rise again next year. If Obama wishes to reduce unemployment, and particularly unemployment among the young and among minority groups, he might consider putting off this increase at least until troubled times are over (I would suggest abolishing the minimum wage altogether, but one must try to be realistic).

(HT: Coyote Blog)

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December 10, 2008 - Posted by | Economy, Politics, Work

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