Economy & Jobs

The Effect of a Minimum Wage Increase on the Youngest Workers

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The debate around minimum wage increases continues to be a controversial one, and corporations, cities, and states are all taking part. For example, the city of Seattle pledged to raise its minimum wage to $15 per hour in the next 3 to 7 years. At the corporate level, Walmart, the largest retailer in the country, promised to raise its base wage to $10 per hour. And on the national level, 20 different states and Washington, D.C., all implemented a minimum wage increase with the dawning of 2015.

These events will continue to spur debate about who benefits from or is harmed by raising the minimum wage rate, but one group of workers often gets overlooked in this debate: teenagers entering the workforce.

Weighing in on Both Sides

Increasing the minimum wage has always been a hot button issue, so it’s important to first take a look at both sides of the argument. Those in support of an increase say that because inflation erodes the value of a dollar over time, it only makes sense that workers who get paid the minimum should see it bumped up over the same period. A minimum wage increase can also help businesses grow through greater productivity and decreased turnover, according to the U.S. Department of Labor.

There are potential pitfalls to raising the minimum wage, however. One issue is that higher wages could put more strain on businesses, leading to inevitable job cuts in the short term. This might especially hurt small-business owners who don’t have nearly the capital on hand as big businesses do. This may force businesses out of cities and states, bringing with them their jobs and revenue.

How Young Workers Are Affected

Another weight on the scale includes a population that is vastly overlooked in the equation: teenagers. Young people can end up disproportionately affected by a minimum wage increase. In 2013, almost 20 percent of teenage workers were paid at the minimum wage level, and many more started at this level. Employers are often happy to hire teens because so many of them are looking for a job, and since they generally apply for low-skill, entry-level positions, employers only need to pay them the minimum wage. While on the surface a minimum wage increase seems like it might help teenagers financially, it could potentially cause teen unemployment by effectively pricing them out of the job market.

According to Stephen Moore in his article for The Patriot Post:

From 2009-13, eight states had a minimum wage averaging $8 or higher… Teenage unemployment averaged 27.2 percent. In the 31 states which did not exceed the federal level… the unemployment rate was nearly 6 percentage points lower (21.3 percent).

Other studies have shown that for every 10 percent increase in the minimum wage, there is a 1 to 3 percent decrease in the employment of low-skilled workers.

It’s helpful to look at this from an employer’s point of view. Since most teenagers have limited or no work experience, any raise in the minimum wage might make it less desirable to hire a young worker. An employer would probably prefer to hire someone with more experience in the industry—someone older—rather than an 18-year-old they’ll need to train from the ground up. Training takes time and money, which businesses will probably have less of if the minimum wage is increased.

Gaining experience in the workplace is essential for the growth of young people. Many teenagers work to support themselves during school or even to support their families. So while an increase in minimum wage means more money in the pockets of workers to match the increased cost of living, it may also increase the unemployment of teenagers, sparking even greater ramifications for the U.S. economy as a whole.

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Syed Hussain is a blogger and freelancer specializing in personal finance, millennial issues and healthcare.  He especially makes personal finance simple and easy to understand for college students and young professionals.