By Michael Saltsman
A summer job used to be a rite of passage to adulthood for the nation’s teenagers. But for today’s teens, a summer job has become as rare as a drive-in movie.
Teens just weathered 66 straight months of unemployment above 20 percent — the longest stretch since the Bureau of Labor Statistics began tracking these numbers in 1948. In Oregon, the unemployment rate for young people still stands at an average 29.2 percent.
A number of factors are to blame: a still-weak economy, for instance, and more competition for service-sector jobs from older job seekers. But past increases in the federal and state minimum wage also play a role. Unfortunately, President Obama and some in Congress are again seeking to hike the federal minimum wage and push entry-level jobs further out of reach.
The evidence from the last federal wage increase is instructive. Economists at Miami and Trinity University analyzed the 40 percent hike that took place between July 2007 and July 2009. Even when accounting for the impact of the bad economy, they found that some 114,000 young adults lost job opportunities as a consequence of the policy. For the least-skilled teens with less than 12 years of education, this translated to a 12.4 percent drop in employment.
You don’t need a Nobel Prize in economics to understand why minimum wage hikes hurt a teen’s chance at landing a summer job. According to Census Bureau data, two-thirds of young adults work in the leisure and hospitality sector, e.g. hotels, restaurants, movie theaters; or the retail sector, e.g. grocery stores.
These businesses typically have single-digit profit margins. They only keep a few cents of every sales dollar and can’t absorb a sizable increase in labor costs. Raising prices isn’t always an option, either, as it could drive down sales from cost-conscious customers. Instead, businesses are forced to provide the same product at a lower cost. That means more self-service.
Think of bagging your own groceries at a grocery checkout, ordering via a tablet computer at a restaurant, or even pumping your own gas. It might be convenient, but it’s a convenience that used to be part of someone’s job description.
Research from nonpartisan government economists suggests these trends will only accelerate if the president’s minimum wage hike takes effect.
For instance, the Congressional Budget Office estimates up to 1 million jobs will be lost if the minimum wage is increased to $10.10. And in Oregon, an analysis released by the Employment Policies Institute projects as many as 2,701 jobs will be lost.
The young people losing these opportunities aren’t just missing out on summer spending cash. Entry-level jobs provide teens an “invisible curriculum” that includes the work ethic, skills and experience required for post-graduation employment. Teens who miss out are at a disadvantage: Research published in the Journal of Labor Economics shows that high school seniors with part-time work experience are earning over 20 percent more on an annual basis six to nine years after graduation than their jobless counterparts.
If the president and his allies refuse to listen to the data and raise the minimum wage, teens who were hoping a summer job would allow them a first taste of freedom will be disappointed to see they have no choice but to stay home on the couch.
— Michael Saltsman is the research director at the Employment Policies Institute, a Washington, D.C.-based think tank that studies issues affecting entry-level employment.