August 8, 2014 The announcement sounded like the premise of a feel-good summer movie. High schoolers in Seattle set to start working in ice cream shops and summer camps are given a raise by their City Council. Employees and employers alike will enjoy the summer of their lives, since all those youngsters will have more money in their pockets to spend at local businesses, as well as make memories on warm, starry nights.
That may be a good trailer, but it hardly captures the reality of how Seattle's new minimum-wage law will play out for real-life teens and the others seeking work in that city's lower-paying industries.
Reality check No. 1 is that there are already far too few minimum-wage jobs for high schoolers and those with few skills or limited education. As the Employment Policy Institute recently reported, in the Seattle area the unemployment rate for 16- 19-year-olds with less than a high school diploma sits at a shocking 31.4 percent. That means that almost one in three teens looking for work—note that they are seeking positions that pay the current minimum wage, not $15 an hour—can't find an opening. Their inability to find a job today doesn't just mean less money for movies and going to the beach this summer. It means they won't start a work history and gain the valuable skills and experience that are necessary for future jobs, ones that pay more and start them toward long-term careers.
Seattle is far from the worst job market for youth in the country: Riverside, Calif., and Portland, Ore., have youth unemployment rates in excess of 50 percent. That means that for every high schooler lucky enough to have a job, there's another scouring want ads.
At least, Seattle isn't the worst youth job market yet. The city could earn that dubious distinction once the minimum-wage hike begins to kick in. Certainly some current workers will be better off under the new law and will enjoy a boost in take-home pay. Yet others will find themselves joining the ranks of the unemployed as business owners try to make due with fewer workers because they can't afford higher employment costs.
Supporters of the minimum-wage increase may sincerely hope that this policy will stimulate the economy or at least do no harm in terms of job creation. Yet common sense and sound economic analysis warn otherwise. The Congressional Budget Office—a nonpartisan research entity—estimated that the Democrats' proposed federal rate hike to $10.10 per hour would result in 500,000 fewer jobs nationwide. Seattle youth be warned: The city's minimum-wage hike will inevitably push employment in the same direction, leaving fewer job opportunities for those starting out.
Nearly half of those working minimum wage are 24 or younger, according to federal data. These young workers typically are not the only breadwinners in their households, and the vast majority live in homes with an annual income of $42,000 or more, according to a 2013 report by the Heritage Foundation.
But, this law will also shape the lives of many adults who are responsible for families. Proponents of the higher minimum wage have argued that the new mandate will particularly help women, who account for two-thirds of minimum-wage workers. This statistic also suggests that women will also be far more vulnerable to the potential job losses created by the new minimum wage. Nationally, women also account for nearly two-thirds of part-time workers, positions that are also are more likely to pay the legal minimum. As employment costs rise, businesses will be tempted to cut and consolidate part-time positions in favor of fewer, more highly skilled workers. That's bad news for those who need or prefer part-time schedules to balance their work and family responsibilities.
It's also bad news for minority youth, who tend to have fewer education and fewer job opportunities. A higher minimum wage makes it less likely a business owner will take a chance on them. The national unemployment rate in March 2014 for African-American teenagers was almost double the rate for whites, a jaw-dropping 38 percent. That's unlikely to reverse if the country follows Seattle's lead and makes hiring young workers more and more expensive.
Proponents of minimum-wage hikes want to cast themselves as champions of the rights of the little guy, people and organizations fighting against greedy corporate America. Yet it's important to keep in mind what minimum-wage regulations are at their core: laws that prevent free people from entering into contracts to trade work for wages below what government says is best. Making it illegal for people to find work and experience hardly seems compassionate. Many families recognize that skill-building positions are often worth more than what they pay, which is why unpaid internships remain a staple for middle-class youth—including, quite likely, the children of Seattle City Council members. Don't younger Americans from less fortunate circumstance also deserve skill-building opportunities? Boosting the minimum wage will only further restrict it.
Lack of employment, not low wages, is the biggest factor creating poverty today. In 2012, just under one in 10 working-age adults living in poverty had full-time, year-round work, while two-thirds had no work at all, according to the most recent census data available (see Table 18). Raising the minimum wage will do nothing to help those who lack employment and can make their problems worse.
If Seattle's City Council wants to help people in need, then this new minimum-wage law should end up on the cutting-room floor instead of part of the city's story. It should be repealed immediately.
Carrie Lukas is the managing director of the Independent Women's Forum.