Putting Washington teens back to work
By Nicole M. Coomer and Walter J. Wessels
The fact that one in four teens in the labor force nationwide is unemployed is disturbing. The fact that, on average, one out of every two teens in the District’s labor force is unemployed? That’s downright scary.
To get a concrete sense of just how desperate the employment situation for teens was this summer, all you have to do is look at D.C.’s Summer Youth Employment Program. The cash-strapped city ended up spending $34.2 million on the program instead of the budgeted $22.7 million — a 50 percent spike — and the city’s Department of Employment Services reported that 83 percent of participants wouldn’t have had a job without the program.
Early employment, like a summer job, is crucial to avoiding a host of undesirable labor market outcomes. But unfortunately the numbers in the District are grim: As of July, only 13 percent of all teens were employed. D.C.’s teen unemployment rate — the proportion of teens actively looking for work who are unable to find it — was averaging nearly 48 percent, almost double the national average.
It’s impossible to pin the job woes of D.C.’s teens on any one factor. The weak economy certainly hasn’t helped, and there are a variety of sociological and structural issues unique to employment in Washington that are difficult to sort out: For instance, the District has a larger percentage of its residents living below the poverty level than do many states.
That said, our new study for the Employment Policies Institute suggests that Washington — and other cities and states around the country — may have done the least experienced members of their workforce a disservice by expanding the coverage of the minimum wage.
Among economists, it’s generally accepted that increases to the minimum wage decrease job opportunities for entry-level employees; we weren’t terribly surprised, then, to find that a 10 percent increase in the minimum wage correlated to a 2.3 percent drop in employment for 16-to-19-year-olds.
But that wasn’t all we found. Interestingly, we discovered that employment losses are considerably greater, as high as 11.1 percent, for teens working in jobs that pay the minimum wage.
These losses are moderated when teens find entry-level work at businesses that aren’t covered by the federal statute governing the minimum wage. For instance, many businesses are too small to be covered by the Fair Labor Standards Act, and some pay less than the federal minimum wage. Seeking such employment helps keep the total teen job loss down after a minimum-wage hike.
But not in Washington. The city has passed legislation expanding coverage of the minimum wage to jobs not covered by the federal law, eliminating a viable alternative source of employment for the less-experienced youth of the city.
Publicly funded stopgaps such as the District’s Summer Youth Employment Program only go so far. Many private employers can’t afford to pay teenagers the wage mandated by the city, so instead of investing in overpriced labor they invest in automation or shift to more self-service. This classic substitution of capital for labor is one reason you’re seeing more self-checkout lanes at the local Safeway and CVS.
The youth labor crisis that occurred in the last large recession in the early 1980s may be repeating itself. Teens across the District are missing out on valuable on-the-job training that’s needed to move up in the job market. As the National Bureau of Economic Research and others have documented, the effect of prolonged unemployment on teens is often negative and lasting both in terms of future earnings and employment.
If legislators are looking for ways to help teenagers find meaningful jobs, our research suggests there’s a better answer than publicly funded programs that stretch the District’s budget. The District’s law now in effect says, “If you can’t produce value equal to the minimum wage or more for each hour worked, then you are prohibited from working.” The burden of a high minimum wage is falling on these less-experienced workers, and it would only be appropriate to allow some employers to pay them a wage commensurate with their skills.
Nicole M. Coomer is an economist at the Workers Compensation Research Institute. Walter J. Wessels is a professor of economics at North Carolina State University. The nonprofit Employment Policies Institute, which provided some of the funding for their study, receives financing from businesses and others with an interest in minimum wage policy.
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