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Teens may pay a harsh penalty for proposed increase

Nationwide, our employment numbers are improving. But for young Americans looking to advance their careers and develop their skills, they're just another piece of bad news. Teen unemployment has risen again, up to 23.8 percent; in New York, the jobless rate for young adults is similarly bad at an average 26 percent.

With a tough market like this, the last thing teens need is for government to make matters worse. Unfortunately, that's exactly what's happening, in the form of well-intentioned but badly misguided minimum wage increases. In 10 states, including New York, legislators are pursuing a higher hourly pay mandate out of a false belief that this is the best way to help their state's low-wage work force. Less-skilled job-seekers such as teens will pay the price.

Prior to the increase in the federal minimum wage between 2007 and 2009, there were 28 states that opted to raise their minimum wage above the federal level. They all did so with the same goal: poverty reduction. But the policy didn't work out as hoped. Economists from American University and Cornell University found no associated drop in poverty rates following the state wage hikes.

What happened instead is that these states made it more difficult for young people to get hired. And the federal wage hike that followed just compounded matters: William Even of Miami University and David Macpherson of Trinity University controlled for the economic downturn and found that more than 114,000 fewer teens were employed as a result of the 40 percent federal wage increase.

It's not difficult to understand why. Establishments that employ our country's young people -- like gas stations, grocery stores and restaurants -- keep just a few cents from each sales dollar and have a customer base with a high sensitivity to price increases. When their labor costs rise 40 percent over a two-year period, the only option is to do more with less.

Unfortunately, some job seekers lacking in experience suffer more than others when the minimum wage goes up. That's a harsh truth for teens generally, but especially for the ones most in danger of staying unemployed or losing their jobs. One recent study found that, for black males without a diploma between 16 and 24 years of age, each 10 percent increase in the minimum wage led to an employment decrease of 6.5 percent. (For white males in the same group, the drop in employment was 2.5 percent).

Unemployed young adults are losing out on more than spending money. While others are getting ahead in the "school of life," learning punctuality, productivity and teamwork, unemployed youths are falling behind in a way that is hard to make up later.

Blindly embracing minimum wage increases might make legislators feel like they're doing something proactive and helpful. But policies like this have effects worse than legislative inactivity.

Michael Saltsman is a research fellow with the Employment Policies Institute.