Minimum wage hike would lower S.C. teens’ job chances

BY MICHAEL SALTSMAN

It’s tough being a South Carolina teenager in search of a job. The Bureau of Labor Statistics reports that Palmetto State teens faced a 31.7 percent unemployment rate in 2012, one of the highest in the nation.

Unfortunately, President Obama’s State of the Union proposal to raise the federal minimum wage by 24 percent stands to make the situation even worse.

The president denies this, of course, citing a single University of California-Berkeley study to argue that jobs won’t disappear after a minimum wage increase.

Activists from coast to coast have picked up on the message, and some have gone so far as to claim that new labor costs mean new jobs.

But fully 85 percent of credible economic studies on the minimum wage point in the opposite direction — that is, they confirm that wage hikes hurt the employment prospects of the least-skilled.

The White House and its supporters look a bit foolish standing on the opposite side of this consensus, especially with the recent evidence from the 2007-2009 federal wage increase.

The minimum wage spiked 40 percent from $5.15 to $7.25, and economists at Miami and Trinity University estimate that some 114,000 young adults were priced out of job opportunities as a result.

Worse yet, teen unemployment has remained above 20 percent countrywide for more than four years — a record since the Labor Department started tracking these numbers.

You don’t need to have a Ph.D. in economics to understand why teens would feel the pinch from a wage mandate.

The businesses at which they are most likely to work — picture a restaurant or grocery store — face thin profit margins of roughly 2 or 3 cents from every sales dollar.

Mandated increases in labor costs can’t just be absorbed with margins like these. Businesses instead have to offset the cost through raising prices (thus reducing sales) or — more likely — by providing the same product with less service. That means more customer self-service, and fewer opportunities for the people who used to fill those jobs.

(It’s a familiar trend: You might already have experienced it while bagging your own groceries, checking your own price at a retailer, or even pumping your own gas.)

Losing these jobs means losing the bottom rung on the career ladder. The skills that teens pick up in these first years in the workforce are invaluable, as studies have shown. From teamwork to timeliness, the foundations of a successful professional life are often learned flipping burgers or waiting tables.

Furthermore, recent economic research suggests that teens who have this early workforce experience will earn more later in life, compared to their peers who didn’t work.

On the flip side, a lengthy spell of joblessness now has been shown to have a lasting negative effect on a teen’s earnings and employability.

So here’s a tip for representatives from South Carolina and elsewhere who are considering the wisdom of the president’s plan:

Don’t price your kids (or your constituents’ kids) out of the jobs they need.

It’s better for them to start at the bottom of the wage scale than to never start at all.

Michael Saltsman is research director at the Employment Policies Institute, a Washington, D.C.-based think tank.