The unemployment rate for 16 to 19 year olds was an astonishingly high 23.8 percent last month. The United States is facing a youth employment crisis.
Young workers are finding it increasingly difficult to enter the labor market, get their first job and work their way up the career ladder. Yet, during this time of persistently high youth unemployment, there have been calls to increase the minimum wage from $7.25 to as high as $10 per hour.
America’s youth are having a hard time reaching the first rung on their career ladders. Now is a bad time to increase minimum wages and make that important step more difficult.
Higher minimum wages generate a tradeoff between higher wages for the employed and higher rates of unemployment. When minimum wages increase, many workers who earn less than the new higher minimum wage lose their jobs. Firms often decide that they can get by with fewer workers instead of paying higher wages.
As one might expect, David Neumark of the University of California‘s Irvinecampus and William Wascher of the Federal Reserve Board survey recent research on minimum wages and find that the least-skilled workers are hurt the most by minimum wages.