by Tyler Cowen
on August 7, 2013 at 7:28 am
in Economics, Education
In July 2013, just 36 percent of Americans age 16-24 not enrolled in school worked full-time, 10 percent less than in July 2007.
That is from Diana G. Carew, via Michael Mandel.
There has been no improvement in the employment situation for U.S. teens since the job losses for this group peaked in October 2009, four months after the Great Recession officially ended, and three months after the federal minimum wage was increased to its present level.
I tend not to think it has much to do with the minimum wage. The reason is we have seen little real job growth for those in the prime working years. All of the job growth in this recovery has been in the 55 and over cohort. The number of 25-54 year olds working today is the same as it was in 1997: http://www.zerohedge.com/news/2012-12-07/number-workers-aged-25-54-back-april-1997-levels
That said, minimum wage laws have zero economic utility.
It might help to know that virtually all of the reduction in the number of employed 15-24 year olds since 1994 has occurred at income levels that are consistent with the minimum wage.
It could be. I’d be curious to know what portion of those jobs are day labor/cash payment jobs like landscaping, farm labor and construction labor. Every morning I see pickup trucks stopping at the local Home Depot picking up Spanish guys. I’m going to assume they are paid at the end of the day in cash. Those jobs, in another time, would be filled by young men entering the work force, college students and high school kids. Those employers prefer these workers for a variety of reasons that have nothing to do with minimum wage.
If you think the minimum wage increase is the reason young adults are not working, explain how this McD’s budget for one of its workers which involves two jobs that pay more than minimum wage is not merely realistic, but can easily be adjusted to a significantly lower wage:
If you can not afford a reliable car, how can you be a reliable worker in 90% of the jobs today. If your parents can not afford to supply you with transportation, but can give you a room and food, even with a college degree in a reasonable field, if the job won’t pay enough to buy a reliable car right away, you might be able to take the job. If the job is in another city with public transit, you might not be able to simply pay the two months deposit plus have enough to live to get to your first paycheck. As bad as things were job wise in the 70s, businesses still paid relocation for most college degree jobs for new employees, and hiring managers could arrange pay advances. I know because I was hired in the 70s when flat broke.
Employers are not hiring because consumers do not have the money to spend consuming, because they are workers who are not earning much and they have tapped out their credit, and in the wisdom of private investment is smarter than public investment, we have had draconian tax cuts and then draconian cuts in public investment, and the private sector believes bridges should decay and collapse because transportation is not a useful good, so they do not waste labor on replacing bridges, or replacing decaying pipelines because we should have more pipeline spills and more exploding houses, and water systems should decay because more sinkholes are needed in roads from washouts.
Thirty years ago in January, President Reagan was a tax and spender, but Obama trying to be Reagan is called a big government socialist. Reagan doubled the gas tax to spend on transportation which would create jobs when unemployment was 10.8% at a time when roads were in bad shape, but in better shape than today. And the minimum wage at the time was higher in real terms than today, as were taxes. Unions were stronger then.
Aren’t you grasping at straws trying to explain why the economy has basically gotten worse for workers over the past three decades of trying conservative economic theories?
What is so “conservative” about Bush/Obama economic policy? Ever rising regulation and regulatory cost burden’s on employers. An expanding public sector giving the expectation of higher taxation in the future (not talking deficits here, just cost of expanding government). Yeah, very “conservative” there….
The minimum wage was higher in real terms under Reagan, but was there an expectation for it to continue rising? Union’s were stronger, but was their strength growing, shrinking, or were their goals changing? And yes, we know that the roads today are in bad shape, in fact both Dems and Reps have introduced infrastructure spending bills.
Who’s the one “grasping straws” here?
This ‘reset’ is more of a ‘sorting’. Bad times come, you sort out the least skilled first. Good times return, you sort in the highest skilled first. The youth will be the first to be fired and the last to be re-hired. This is less of a ‘reset’ and more of an order of operations.
Is that a “reset” or the result of very slow economic growth?
Why are they looking at July rather than, say, November, when classes will actually be in session?
A nagging sense that confirmation bias is what people need?
From the article:
“The same trend holds even if we look at months where more students are enrolled in school (i.e., January).”
I’m always skeptical at claims like those. If that’s the case, why didn’t you just provide the graphs for those months? And students are often on winter break for much of January and not all of them are able to find employment for that brief 1 month period.
Yes, but how does December employment look like? There is a fairly well defined cycle in American hiring, with the Christmas period having a major impact. (With a predictive value in what employers/retailers think about their prospects for that period, it must be added.)
July? Not so much.
What was that about confirmation bias?
In any event, Obama says yet again we don’t have a domestic spying program. He gonna love me long time. And he praises McCain for being a Republican who isn’t against everything. We aren’t against everything, douche, just against your dumbass ideas like jacking up the minimum wage and increasing medical liabilities in a depression.
Just what we need Mr. President is to reinforce this notion that all the world is a battlefield and civilians are legit targets. God I hate this cocksucker.
Does she mean 10% or ten percentage points?
She apparently doesn’t know the difference. Devastating for an economist.
Looking at the graph it should be percentage points.
It must not be that devastating, they do it all the time. They give the impression that there are conventions as to when one is talking about one versus the other, so it seems to serve the dual purpose of confusing the out-groupies while signaling your in-groupiness.
There’s college educated kids with clean records working part time bottom rung jobs. The bottom rung of the ladder is very crowded. If you don’t have connections or have made youthful mistakes, you’re screwed.
Clearly their reservation wages are too high. They are so wealthy they don’t even go to school!
Let’s not forget their iPhones that they probably spend all day on.
Basically they are lazy and there is nothing wrong with my philosophy, so why should I change any of my priors?
Exactly! By all means, let’s jack up the minimum wage and increase government liability exposure through medical in the trough of a depression!
Can I have a free lunch, too? I get kinda hungry trying to show these fogies how to hide spreadsheet columns over and over again.
The US has finally, after many years of hard work managed to fundamentally transform their economy into a European style social democratic type, whose chief characteristic is high youth unemployment.
We’d have riots, except no one shows up unless we give away free i-pods.
I’m less pessimistic – the US isn’t there yet, and I think she can pull out of this nosedive – but you’ve hit the nail on the head as far as what’s going on here.
We;ll, we have the unemployment. The social welfare benefits, not so much.
Hey bro, I’ve got health insurance till 26, a roof over my head, 3 meals a day and an endless amount of entertainment at my finger tips. Who’s the rational thinker now?
A point of usage: The correct phrasing is “Hey brah”.
Youth unemployment doesn’t matter. As long as GDP is higher, then we are better off. Printing money helps gdp go higher, therefore the money printing we are doing is working great…keep doing more. Yay central banking!
Thank goodness Schumer and Rubio will help fix that by bringing in many millions more immigrants.
Last time I was subbing at our nice, middle class high school I sat in on a junior class. Here’s what they did — name game to get to know each other, then their assignment was to figure out how to log in to their student page on the school Web site. This assignment was written on the board. Then it was explained. Then the class had to repeat the assignment back. Then they were reminded as they left the room.
Now, just because they were treated like idiots doesn’t mean they were actually idiots. But I wouldn’t hire one of them over a guy who has the brains to turn up at the Home Depot parking lot. I also wouldn’t fire a fifty year old, more expensive employee to hire one of these guys on the cheap, like my anecdotal memory tells me happened a ton during the 80s recession.
I am really curious about what you think about this ReStud list http://www.oxfordjournals.com/our_journals/restud/resource/history_of_restud.html.
Already a large number of Nobel prizes. Is RESTUD indeed such a success?
I’m with Ironman on this. The fact that this article could be written, and that Tyler could refer to it here and in his linkedin.com article, with no mention of a 40% increase in the minimum wage in a recessionary, low inflation context, is astounding. It’s like standing in a rain storm and wondering why you’re getting wet. I don’t understand why Tyler would have a blind spot about this.
Tyler is well aware of the minimum wage changes. The fact that he didn’t mention them doesn’t mean he thinks they had no effect.
Certainty in the fact that it was all caused by the minimum wage increase is just as politically motivated as saying that it had no effect at all.
Excellent point, bob. If you ever actually come across someone who said that, you should tell them.
I’m sure Landsburg, Levitt/Dubner, etc. can come up with a plausible explanation for this … Like maybe young people value their leisure time more, raising the opportunity costs of going to work and school …
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