The overwhelming majority of economic studies shows that a high minimum wage has the greatest negative impact on people with low-skills, such as teen workers entering the workforce.
LAST fall, voters passed Initiative 1433 to increase our state’s minimum wage to $13.50 by 2020 and require all employers to give workers paid sick leave. The new law went into effect on Jan. 1, with the minimum wage jumping to $11 an hour, up from $9.47.
That may seem like great news for the state’s minimum wage earners. What isn’t great is the harm the new law will do to the young, inexperienced and unskilled workers who typically try to get entry-level jobs that pay minimum wage.
Hiring a 16-year-old who has no work history or marketable skills is a gamble for an employer. When the minimum wage is low, it is a risk many employers are happy to take. The lower wage justifies the extra work employers must put in to teach that 16-year-old how to be a productive employee. As young people gain experience they generally earn a raise, or move on to a higher-paying job.
When the minimum wage is too high, such on-the-job training becomes too expensive for employers. Many business owners quit hiring young workers, favoring applicants with more experience and proven skills instead.
This is not just my opinion. The overwhelming majority of economic studies on the high minimum wages over the past two decades shows that a high minimum wage has the greatest negative impact on people with low-skills, such as teen workers just entering the workforce.
The University of Washington researcher studying Seattle’s $15 minimum wage law explains: “…If they [employers] are going to be paying as much as they have to pay they are not taking a chance on a teenager, they are looking for a more experienced worker to fill that job.”
In 1999, Washington state increased its minimum wage to the highest in the nation. Since then we have consistently ranked among the states with the highest youth unemployment. Today, our unemployment rate for teen workers is 21 percent, nearly four times the general unemployment rate of 5.4 percent. It’s obvious; high mandated wages kill jobs for youth.
High youth unemployment is not simply a matter of young workers going without a summer job. There are significant long-term effects of youth unemployment — a “wage scar” that does lasting harm to a worker’s job prospects and future earnings. The longer a young person remains unemployed, the greater the long-term scarring effect.
A too-high minimum wage that discourages employers from hiring teen workers means more young workers will bear the scar that will leave them with fewer job opportunities and lower wages well into middle age.
The news isn’t all bad. A legal starter wage that is lower than the costly minimum helps counteract the job-killing impact on youth employment. Lowering the minimum wage for young workers can help them find work.
This is precisely why state law allows employers to pay 14- and 15-year-old workers a so-called training wage that is 85 percent of the minimum wage. State officials understand few employers will hire a 14- or 15-year old with no skills or experience and pay them a high minimum wage. But this same reluctance extends to hiring 16- and 17-year-old workers with no skills or experience.
The state Department of Labor and Industries has the authority to, and should, expand the benefits of a training wage to all workers under 18. Failing this, lawmakers should pass legislation to the same effect. I-1433 does not mandate a minimum wage for workers under the age of 18, so passage of a teen training wage would not run afoul of the two-year moratorium on amending voter-passed initiatives.
The chronic, high teen unemployment rate in Washington state has the concern of lawmakers such as Sen. Michael Baumgartner, R- Spokane. The chair of the Commerce, Labor and Sports Committee, Baumgartner has indicated he again is interested in sponsoring a teen-wage bill this session. In the past, he’s sponsored and supported multiple teen-wage bills.
A training wage for teen workers would provide employers with a much-needed incentive to take a chance on hiring young, unskilled and inexperienced job seekers. Such a policy would reduce the harm the state’s new minimum wage will have on job opportunities now, and in the future, for our state’s young people.