Why Only One in Four Teens is Employed
The Wall St. Journal’s editorial page weighed in Friday with a somewhat laughable piece (my title was their sub-hed) on how the 2009 increase in the minimum wage has decimated employment for the 16-19 year old cohort (since 2001). Except for a few inconvenient facts.
As the Journal is quick to point out:
Only 24% of teens, one in four, have jobs, compared to 42% as recently as the summer of 2001.
How a minimum wage increase that was enacted first in 2007 is responsible for a teen employment/population ratio that has been declining since 2001 — throughout the other guy’s entire presidency, in fact — is not addressed. Where was the Journal as the rate declined from 44.6 when Bush took office to 30.6 when he left? Where were they when it made a historic low under Bush’s watch (August 2008)?
Journal:
Back on planet Earth, the minimum wage increase has coincided with the plunge in the percentage of working teens. Before the most recent wage hikes, roughly seven million teens were working. Now there are closer to five million with a job and paycheck.
That statement is, sadly, simply false. At the time “before the recent wage hikes” (July 2007), there were 5.888 million teens employed (BLS Series LNS12000012). There are now 4.240 million employed. There have not been “seven million teens” working since the early months of the Bush administration. As for when “the plunge” actually began, see for yourselves:
Source: BLS.gov
The plunge — which began on Bush’s watch and continued through his “boom” — took place during a period when the minimum wage was $5.15/hour and was not raised until 2007. No explanation for that inconvenient fact. Or the inconvenient fact that the teen employment/population ratio rose after the Sept. 1997 increase in the minimum wage to$5.15 (where it stayed until a decade later, when it went to $5.85).
And why only gloss over the fact that teens, generally, are not eligible to make minimum wage in the first place:
Must young workers be paid the minimum wage?
A minimum wage of $4.25 per hour applies to young workers under the age of 20 during their first 90 consecutive calendar days of employment with an employer, as long as their work does not displace other workers. After 90 consecutive days of employment or the employee reaches 20 years of age, whichever comes first, the employee must receive a minimum wage of $7.25 per hour effective July 24, 2009. [Ed note: This would seem to me to cover summertime employment.]
Other programs that allow for payment of less than the full federal minimum wage apply to workers with disabilities, full-time students, and student-learners employed pursuant to sub-minimum wage certificates. These programs are not limited to the employment of young workers.
What minimum wage exceptions apply to full-time students?
The Full-time Student Program is for full-time students employed in retail or service stores, agriculture, or colleges and universities. The employer that hires students can obtain a certificate from the Department of Labor which allows the student to be paid not less than 85% of the minimum wage. The certificate also limits the hours that the student may work to 8 hours in a day and no more than 20 hours a week when school is in session and 40 hours when school is out, and requires the employer to follow all child labor laws. Once students graduate or leave school for good, they must be paid $7.25 per hour effective July 24, 2009.
Oh, and one other thing: The Emp-Pop Ratio for the 55+ cohort (which dwarfs the 16-19 cohort) was on the rise from 1993 through 2008, and has not budged much since then. Demographics do not seem to figure into the Journal’s hypothesis.
Source: BLS.gov
Here’s the ratio of 55+ Employed to Teen Employed. You may notice somethin’ happenin’ here, what it is is exactly clear — in 2001, the exact year referenced by the Journal, the first of the boomers (born in 1946) turned 55. The rest is history:
Source: BLS.gov, analysis
This as the 55+ Employed cohort has grown by over 10 million, from 18.5 million in 2001 to 28.7 million recently:
Shame on the Journal for trotting out this nonsense yet again. It’s embarrassing and, frankly, such hackery should be beneath them. Really, enough already. Please stop. Sigh.
I’ve written previously about this here (almost two years ago), to cite but one of my earlier critiques of this argument.
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July 5th, 2011 at 9:33 am
Excellent analysis, BR. Do you get much feedback when you critique pieces like this? Do you often send the author your critique directly? Does that more likely get a response?
Invictus: I’ll take the credit (or blame) for this one. And while in the past I have contacted authors directly about their work (for better or worse), I did not do so in this case. Thanks for the comment.
July 5th, 2011 at 9:36 am
[...] Wall Street Journal, which is frequently full of shit, constructs an argument blaming it on the last increase in the minimum wage. Apparently now that they are a Murdoch publication, facts are optional. Bookmark [...]
July 5th, 2011 at 9:39 am
Postman, Invictus wrote this.
July 5th, 2011 at 9:43 am
Invictus – interesting, I actually hadn’t realized that it was the teens who were really lagging in employment lately.
what conclusions do you draw from this about the labor market in general? there’s less “small business” type of employment that might typically hire younger workers?
Invictus: I agree with your premise that small businesses — those that would surely be more likely to hire a teen in the first place — are not doing much, if any, hiring. And we generally know this to be true from the monthly NFIB Small Business Economic Trends report. It’s also true that the lousy job market either sent kids back to school or kept them in school longer than they’d probably otherwise been enrolled. (And we know from the monthly numbers that they’ve been piling on the student loan debt.)
July 5th, 2011 at 9:45 am
excelllent post.
According to the journel’s logic, they might as well re introduce slavery, that should really increase
employment. Some handouts for food and sleep in the barn for hard labor without intereference from
any kind of government standard.
July 5th, 2011 at 9:47 am
Fox News, Print Edition.
July 5th, 2011 at 9:51 am
lying and stretching the facts on the editorial page is not NEW for that rag.
Doing it on the front page is however….
July 5th, 2011 at 10:07 am
“By Invictus” [easily the most optimistic and fey byline in the blogosphere]- very compelling; another demonstration of the nauseating propaganda machine that is the WSJ.
Conclusions:
‘eating the seedcorn’ or straightup cannibalism by the near geriatric?
In the early and mid eighties I worked at a hotdog place run by two great Italian guys (Sicilian, sons of immigrants), brothers. I think I was getting paid 6.00 or 6.25 in ’85. They worked our asses off and we were happy to sweat it out. And they were making a ton of money. Every day I walked in the place, the younger would yell out his nickname for me and punch me in the chest. Best boss ever. Real people, not these anodyne, sociopathic, MBA-addled, Toyota-driving HR poisoned human holographs. Frankly, at least 80% of the people reading this blog are constitutionally incapable of understanding why the principles espoused in “Jack’s Right Fight” are insipid and corrosive. Here’s some catnip for all y’all: http://www.strategy-business.com/article/10107?gko=940c4
July 5th, 2011 at 10:12 am
sighing and sadness is an honorable emotional reaction
i go with amusement,
especially in light of the otherwise totally absent WSJ concern for high school dropouts with no skills
July 5th, 2011 at 10:13 am
“That statement is, sadly, simply false.”
It’s the Wall Street Journal of course.
It has become the Globe of financial reporting. Use its information at your own risk.
July 5th, 2011 at 10:17 am
And they wonder why circulation is declining.
July 5th, 2011 at 10:27 am
My apology, Invictus, and thanks for your reply.
July 5th, 2011 at 10:27 am
True, the WSJ may be a sleazy neocon propaganda rag.
But central planning of minimum wages is still a poor idea, right up there with central planning of interest rates.
The going rate for illegal day laborers is above the minimum wage, so for the most part the minimum wage is just a ‘good government” fig leaf to assuage the gov-worshipers on the east and west coasts.
Interesting, though, that the day rate for illegal workers is roughly similar to the fully-burdened minimum wage, including employer-paid overheads. Cut out the meddling gov between consenting adults, and both parties are better off.
Here’s to ‘Freedom from Frank’ (Roosevelt) and his crappy wage laws.
July 5th, 2011 at 10:35 am
[...] The Big Picture blog has a nice decimation of the Wall Street Journal’s recent contention that a 2009 increase in the minimum wage has hugely hurt teen employment rates. The minimum wage has come under political fire lately, and could become an issue in the 2012 presidential election. Candidate Michele Bachmann has indicated she sees the minimum wage as inhibiting job growth, and has in the past been even more vociferous, saying its elimination could out unemployment. The research on the minimum wage shows it has mixed results. Recent Posts [...]
July 5th, 2011 at 10:35 am
The thing that fascinates me is that teens are only small part of the minimum wage picture if you look at it from the perspective of all of those ADULTS with families who have had to take these jobs. From $16 an hour factory job, since moved to Pudong China, to stocking shelves at Wal-Mart. There are millions of families whose ability to participate in the consumer economy depended largely on whether a partisan fight on the minimum wage would go one way or another. I imagine that families that depend on minimum wage salaries spend nearly all of the money they make to ends meet. In other words that money goes right back into the economic machine. But I guess Michelle Bachmann is right on the money… if we let wages collapse everyone will have a job making $100 a week to pay their $800 rent, $200 groceries (eating ‘light’) $200 gasoline fill. Right wing math solves all problems.
July 5th, 2011 at 10:41 am
More political nonsense on a fianncial blog. I come back for 1 day…read the first post….and off to vacation again.l
ECONOMICS. That is the only thing I want to read about on sites like this.
Invictus: Bemoaning “political nonsense” (an assessment with which I obviously disagree) and then not offering up any semblance of a rebuttal is fairly weak, is it not?
July 5th, 2011 at 10:48 am
@curbyourrisk
You are complaining that discussion of the minimum wage is politicial? Seriously?
It may be important for you to consider that this particular issue is…. well uhm… determined by politicians…
July 5th, 2011 at 10:59 am
Umm..no, Barry. You are wrong. It’s hard to pin point exactly what a minimum wage increase does in as vast and diversified an economy as the United States. Of course, common sense and supply & demand tell us that if the government imposes a price support, there will be excess supply. But, I understand that we no longer just trust common sense.
Still, I would ask for you to check out this story about American Samoa. American Samoa is a tiny economy in which we can more easily see the effects of big policy changes. Luckily for us, several years ago the government decided to enforce the minimmum wage law in the American Samoa (which has been exempt from the law for all of its history). The result? Total economic devastation. Don’t take my word for it. Here is the Government Accountability Office’s own report on the issue:
http://www.gao.gov/new.items/d11427.pdf
Finally, just wanted to say if increasing the minimmum wage is such a good idea, why don’t we just raise to $10/hr or $20? or $100? Why not??
Invictus: I’m not sure this report on American Samoa — while certainly interesting (and I thank you for the link) — translates well to the United States, especially when I read this: “In 2006, about a third of American Samoa’s workforce was employed by the two tuna canneries; about a third was employed by other businesses, many supporting the tuna industry; and about a third worked in the government sector.” Too closed a work environment, in my opinion.
As to your second point, whether or not increasing the minimum wage is a “good thing” was not addressed in my post. What I tried to address was the Journal’s claim that raising it had decimated teen employment. Yours is another discussion entirely. I will say this, though: If cutting taxes raises revenues, why not cut them to zero?
July 5th, 2011 at 11:08 am
Drop off from 2009 is precipitous. Drop off from 2000 is also.
It’s not so hard to imagine that if you have to hire for a low paying job and have the option to pay the same hourly rate for 2 candidates from a large population, I’ll hire the 55 year old rather than the 18 year old.
If the adult unemployed pool is increasing and the minimum wage rate rising, then the effect will just get precipitous-er. The WSJ point is valid even ifignoring the 2000 – 2009 data.
July 5th, 2011 at 11:23 am
Would someone please explain to me with all this teenage unemployment why it is that most businesses on Cape Cod have to hire J-1 visa workers because they cann’t get locals. So I have been told.
July 5th, 2011 at 11:40 am
I can tell you why only one in four teens is employed, and I don’t need any graphs to do it:
- Thanks to the “Not-So-Great Depression” businesses aren’t hiring.
- Those that are hire adults (because they need the money and are willing to work indefinitely full time).
- The “entitlement generation” doesn’t “need” to work.
- Thanks to HR and Legal, many businesses are afraid or not allowed to hire young workers. Many companies give teens a 45 minute psych test created by consultants to absolve hiring responsibility for a zero-skills job.
- Since there are so few jobs available, they go to friends and family.
July 5th, 2011 at 11:52 am
If raising the minimum wage doesn’t produce higher unemployment, then why not just raise it to $20/hour…? Or even $50/hour…?
Instant wealth for the proletariat.
July 5th, 2011 at 11:57 am
It’s funny to watch these GOP genuflectors use argumentative tricks, irrelevant one-offs and thought experiment straw men to undermine an excellent piece that disproves the halfwits on the Wall Street Journal opinion page.
The editors simply can’t add. Rather than a Fairness Doctrine, the innumerate WSJ editors don’t have enough academics on staff. Ironic, that one.
July 5th, 2011 at 12:12 pm
100% of the landscaping jobs in my part of the country are filled by Mexicans… making a minimum of $15.
July 5th, 2011 at 12:19 pm
the reason that teen employment is lower than before is because small business doesn’t have enough business to support needing more help (that and they can hire older workers , who are now desperate for work). every survey I have head about from small business says the same thing. we don’t have enough business, its not taxes, etc, there is enough demand for them to justify hiring. but then WSJ has nothing to do with them, nor does the US chamber of commerce. they belong to big business. and in some cases, only a few of them at that
July 5th, 2011 at 12:19 pm
So, what’s the solution?
Should we prohibit older workers to work in order to make room for young workers who may or may not even qualify? should we force 65-and-over crowd to work only part time? should we indefinitely extend welfare? (the medical side of things will be taken care of by the Obama’s bill, regardless what Michelle Bachmanns of this world say – the bill gives insurance/pharma/hmo crowd 40 million new “customers” whose bills are guaranteed by the federal government, they won’t let this law be defeated.)
It’s good to have yet another confirmation about what the Fox Street journal has become. That’s easy. What’s the solution to the unemployment other than to sent 5 million 18-to-24 year olds to teach english to rich russians and rich chinese?
July 5th, 2011 at 12:21 pm
So the toxic political bias of the editorial board has spread to the front page? Sad.
July 5th, 2011 at 12:33 pm
Corrected for inflation since 1967, minimum wage should be in the $10/hour range, around $20k/year. Just a bit less than the $22k/year poverty level for a 4-person family…
So, those bally-hoo’d $14/hour jobs GM is filling is an income a family can barely live on. Not to worry, though — Wagoner got his double-digit million bonus for guiding the company into bankruptcy, so he’ll be able to pay for his own doctors, and not be a burden on Medicare.
Instead of running tax-funded assistance via Medicaid, housing, food stamps, home-heating, (et cetera ad nauseum) through govt, maybe raising & CPI-indexing minimum wage might let folks look after themselves.
Or, we could “twiddle the dials” at the Fed and give the banks another $9 Trillion, so the Captains-of-Industry and Titans-of-Finance can live in a properly comfortable fashion.
The adage “a rising tide floats all boats” works in reverse, too — which might explain the decline of the Middle Class and the affordability of basic necessities.
July 5th, 2011 at 12:40 pm
Invictus – you posted charts of teen employment/population ratio, and 55+ employment/population ratio.
can you post the charts for the middle group – ie, 20-55 employment/population ratio? or email me, if you have it. thanks.
Invictus: What you’re asking for involves a very simple calculation to obtain. I’ll work it up when time allows and either post it here as a comment or email it to you.
July 5th, 2011 at 12:49 pm
arbit asks why we have a minimum wage, and why not $50 an hour.
- True, minimum wage cannot be assigned unrealistic values.
- But, also true, workers in this category have no bargaining power.
Employer’s resort to a number of techniques to lower the bargaining power of workers. Including trucking them in over the border. A legal minimum wage reduces illegal immigration, because there are penalties.
July 5th, 2011 at 12:53 pm
Maybe Invictus could also address “Regulation”.
De-Regulation is also not heaven.
Hunting in Pennsylvania.
How many Game Warden’s does PA need with 2 hunters and a deer population of 500,000? None.
How many Game Warden’s and hunting license regulations does PA need with 500,000 deer, and 1,000,000 hunters? A long list. Otherwise, one year’s hunting could extinguish the deer population.
We should also graph EPA regulations per population growth.
PA and NY are now getting ready to pollute it’s water supply by allowing Fracking.
In NY they will allow fracking 500 feet from a Primary Aquifer. No, not 5 miles, that’s 500 feet. NY just got played.
July 5th, 2011 at 1:00 pm
Quote of the Day: Unbelievably Loopy Economics; CAP Finds That Demand Curves Slope Upward
http://mjperry.blogspot.com/2011/06/quote-of-day-unbelievable.html
Any response to that?
Invictus: I’ve not seen CAP’s report, but will try to find it and give it a read. I’ll reserve comment on it until such time as I’ve done so, which I believe is the prudent course.
July 5th, 2011 at 1:22 pm
It’s worth pointing out that that many college graduates are also struggling to find work in a difficult economy, and so competing for many of the same jobs teenagers are. The fact of the matter is, if there was a healthy jobs market the teen/college graduate numbers would be much better . . . and the minimum wage argument would disappear.
As an aside, people need reasonable wages for basic needs including, in many instances, college costs. If the WSJ wants to focus on wages, focus on those at the top of the heap . . . or maybe their own.
July 5th, 2011 at 2:00 pm
Iron Law of Wages
http://en.wikipedia.org/wiki/Iron_Law_of_Wages
vs.
http://www.fpif.org/reports/executive_excess_2010
Can somebody please explain why Nardelli got $200 million to stop ruining Home Depot? I know it’s ‘water under the bridge’ but for the life of me I cannot understand how something like that happens.
July 5th, 2011 at 3:50 pm
Stronger than any correlationary data is the empirical evidence that suggests the minimum does in fact reduce teenage (and overall) employment. It was certainly a poor choice academically by WSJ to data-pick though.
July 5th, 2011 at 3:53 pm
The olds took the jobs. Period. Thank you for the lovely charts proving what I’ve been anecdotally seeing for at least a decade. I have a profound interest in this, and I’ve been watching.
As for the minimum wage, it also does not apply to a significant percentage of those teens who are still working: those employed by their family. The only teens I still see employed are working in their family’s business. They work hard, they just don’t necessarily get paid. The vast majority of the remainder of working teens are in the “informal” sector: mowing lawns, babysitting, pick-up work — the sorts of things kids have been doing for spending money forever. The only good thing to say about this is that both groups are getting a profound education in what it takes to be an entrepreneur.
But real “jobs” that you can put on a resume? Forget it. Everybody — straight through until age 22 or so — who works for an actual corporation has to work for free as an intern. They get a few years of you for free if you expect them to pay you. It’s quite sick.
July 5th, 2011 at 4:03 pm
I think the crappy economy has the most to do with teen unemployment. All the jobs that used to be done by teens are now being done by underemployed 45 year-olds. I see it all over my town.
July 5th, 2011 at 4:18 pm
From: http://mjperry.blogspot.com/2011/06/quote-of-day-unbelievable.html
“By this logic, if we raised the minimum wage to $25 an hour we’d have full employment.”
So, by WSJ logic, it’s better to give away money to banks or pork out stimulus money, rather than see it get into the hands of the working population — who ARE the free market.
How DO they figure money circulates, anyway?
July 5th, 2011 at 6:26 pm
[...] WSJ is under assault for merely having mentioned the minimum wage as a source of the problem. This site wags the finger at the paper for daring to suggest such a thing, pointing out, for example, that [...]
July 5th, 2011 at 9:35 pm
Great post on this nonsense.
Of course, the minimum wage is racist, as this post here comments
http://dismalpoliticaleconomist.blogspot.com/2011/07/don-rumsfeld-says-defense-cuts-led-to.html
July 6th, 2011 at 9:21 am
JohnathanStein Says:
July 5th, 2011 at 4:18 pm
From: http://mjperry.blogspot.com/2011/06/quote-of-day-unbelievable.html
“By this logic, if we raised the minimum wage to $25 an hour we’d have full employment.”
So, by WSJ logic, it’s better to give away money to banks or pork out stimulus money, rather than see it get into the hands of the working population — who ARE the free market.
How DO they figure money circulates, anyway?
…………………………………………………………………………………………………….
min wage at $25/hr.
i believe this would be good inflation, a possible solution to the mortgage crisis,
the banks would be out of the hole and the workers would also be out with higher wages.
I can’t remember, there was an economist suggesting such a solution.
I think the major point is what the minimum wage is set at. Right now its pretty
low, hard for the avg joe to subsist on.
July 7th, 2011 at 10:33 am
Nice job.
Teens can live at home.
Workers on the lower end of the wage scale, with families can barely afford a home.