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Ditching the Minimum Wage in a Post-Coronavirus Economy?

Youth unemployment is skyrocketing in the Coronavirus economic bloodbath.

The U.S. labor market has been a bloodbath over the last two months, shedding tens of millions of jobs and erasing more than $1 trillion in income for workers. One casualty usually omitted in the media’s unemployment coverage is joblessness among youth. With the private sector battered, beaten, and broken, it is anyone’s guess as to when it will fully recover. This is bad news for young Americans, who are already at a disadvantage due to the government’s attempt to outlaw jobs for teenagers and 20-somethings. Is it time to suspend the minimum wage to give young people a chance to learn a skill, gain experience, and build their human capital?

Soaring Youth Unemployment

According to the Bureau of Labor Statistics, the youth (age 15 to 24) unemployment rate surged to 27.4% in April. When you focus on those 16 to 19, the jobless figure jumps to 32%. This is the highest it has been since just after World War II, which is interesting because the number had been trending at a 50-year low before the Coronavirus pandemic shut down the economy. Employment opportunities for young people, whether it is in mom-and-pop retail shops or seasonal lifeguard positions, may be in short supply for quite a long time. What is the solution for millions of Generation Zers who want to add to their résumés and put a few bucks in their pockets?

Down the Progressive Path

Progressive politicians’ panacea for higher pay and more jobs is to install a government-mandated price floor on labor. Because they cannot look beyond their good intentions, these interventionists fail to realize that the very people they wish to help, particularly low-skilled labor, are the same people who suffer the most from these feel-good public policy prescriptions. Lost jobs are a direct consequence of the minimum wage, and there are other ramifications, too, such as automation acceleration and operational adjustments.

In 2018, a free-market think tank published a study that found young Americans are working less. The Mercatus Center released a paper, “Declining Teen Employment,” that found the labor force participation for youth is 34%. This has been a declining trend for a quarter-century: 52.7% in 1994, 43.9% in 2004, and 34% in 2014.

Researchers warn that, without human capital accumulation, there has been an increase in teen idleness, flat relative incomes, and teens facing heightened competition from immigrants.

“Higher minimum wages have led both to fewer teens in school and employed at the same time, and to more teens in school but not employed, which is potentially consistent with a greater focus on schooling. We find no evidence that higher minimum wages have led to greater human capital investment. If anything, the evidence points to adverse effects on longer-run earnings for those exposed to these higher minimum wages as teenagers.”

For jurisdictions that have sharply raised their minimum wages in the last couple of years, one of the chief unintended consequences has been a barrier to entry for young people. This makes sense, considering that the increase in the cost of labor disincentivizes companies from hiring workers who require training. At a time when tens of thousands of businesses – large and small – need to start from scratch, young and unskilled laborers are at the biggest disadvantage.

If this trend persists, the future no longer appears bright. Tomorrow is now the dying of the light.

Cheap Hooch or Energy Drinks?

In the extraordinary 1939 motion picture, The Roaring Twenties, the great James Cagney returns home from World War I to spend his days finding a job, only to be turned down every time. Frustrated, discontented, and perturbed, Cagney eventually joins the criminal underbelly of bootlegging. After years on top of the world, he falls and drowns in bottles of cheap hooch.

Should young people fail to find employment, they will inevitably become attracted to the treasure trove of Mephistophelean leftist goodies, from a universal basic income to free college at the point-of-service. The youth of today and tomorrow will discover that handouts are far more appealing than submitting CVs and facing repeated rejections. Before you know it, a hard-to-ignore voting base declares that free stuff is a human right, forcing the hands of power-hungry politicians who want to stay in public office out of fear of having to do an honest day’s work. Free tuition, free health care, and free money become the law of the land, and the inherent characteristics of the industrial revolution are gone.

The youth are now left to spend their days drowning in bottles of cheap hooch – or a 12-pack of Monster energy drinks.

~

Read more from Andrew Moran. 

Read More From Andrew Moran

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