MacIver Report: Increasing Minimum Wage Hurts Teens

Thousands of Youth Denied Access to Wisconsin Workforce Due to Recent Hikes

[Madison, Wisc…] Calls for an increase in the minimum wage would not help low skill workers and would have a devastating impact on teen employment, according to the MacIver Institute.

“Teen unemployment in Wisconsin is already at incredibly high levels,” said Brett Healy, President of the John K. MacIver Institute for Public Policy. “Forcing an increase in the minimum wage will put even more of them out of work and will have a negative ripple effect throughout the economy.”

MacIver notes that since 2002 the minimum wage in Wisconsin has increased from $5.15/hr to the current $7.25/hr; meanwhile, the unemployment rate for Wisconsin teens has increased from 15.5 to 19.8 an increase of 27.7 percent over the decade. 

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Making matters worse, the average number of hours worked by these young Wisconsinites first entering the workforce has declined from 12.9 hours per week to just eight.

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Economists David Macpherson of Trinity University and William Even of Miami University released a study in 2010 that examined the impact of the federal minimum wage increase between 2007 and 2009. Using an updated analysis their state-specific data, we conclude that the minimum wage hikes since 2005 have reduced current teen employment numbers here by 7,109.

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“More than 7,000 eager young Wisconsinites would be working today had the minimum wage not been raised three times in the last decade,” said Healy. “That first job helps teens acquire and display a work ethic and in many cases can make the difference in being able to afford to move on to college. Why make matters even worse?”

Nationally, as of May 2012, teen unemployment has been above 20 percent for 43 months, according to the Bureau of Labor Statistics. The BLS has been tracking teen employment for more than 60 years and this downturn is unprecedented. 

In 2007, economists David Neumark and William L. Wascher surveyed the available research on minimum wage effects on low-skilled employment. They concluded: “In sum, we view the literature – when read broadly and critically – as largely solidifying the view that minimum wages reduce employment of low-skilled workers, and as suggesting that the low-wage labor market can be reasonably approximated by the neoclassical competitive model.”

The Journal of Labor Economics reported that high school seniors working part- time earned higher wages 6-9 years later than their counterparts who didn’t hold a job.

Healy says denying low-skilled teens entry into the workforce, and the wages that come with those entry level jobs, only further strains the expensive government funded entitlement programs.

“Raising the minimum wage prevents teens and other low-skilled workers access to the ground floor of the workforce, which potentially increases their draw on federally-backed financial aid for higher education and ultimately for food stamps, Medicaid and other programs.”

Wisconsin Minimum Wage and Youth Employment

Teen Employment

For Immediate Release – For further information, contact: 608-237-7290.