Is Anyone Shocked by High Teenage Unemployment?
No, FDR, economic laws are not manmade.
In his nomination speech at the 1932 Democratic National Convention, Franklin D. Roosevelt declared, “We must lay hold of the fact that economic laws are not made by nature. They are made by human beings.” Indeed, much, if not all, of the New Deal was an attempt to circumvent economic laws – with predictable results.
George Santayana wrote, “Those who cannot remember the past are condemned to repeat it,” and it is true. Perhaps we see the clearest example in how politicians and bureaucrats claim to be able to rewrite the laws of economics. Nowhere is that example more stark than the case of teenage unemployment and minimum wage legislation.
When he was running for president Barack Obama declared that he wanted to see a minimum wage of $9.50 an hour by 2011, which would follow the increase to $7.25 last year. While he claimed this would “bolster” workers and make the U.S. economy stronger, in reality Obama would have been more truthful had he run on a promise to put teenagers out of work.
Indeed, teenage unemployment today is around 26 percent, and the Usual Suspects are concerned. The situation is so bad that some young people are even taking unpaid internships, something that state governments (and the unions that back them, of course) have declared illegal. Others, like this blogger, bemoan the fact that young people are not getting valuable work experience.
Yet for all of the angst from people who really want to believe that government fiat can trump economic laws (or create new ones), we are dealing with a situation that surprises no one who actually respects economics. The combination of both a recession and a substantial increase in the minimum wage is hitting low-skilled workers (and teenagers pretty much fit into that category) who are an economic burden to employers if they cannot produce enough to justify their pay.
A March Wall Street Journal editorial (subscription site) laid out the carnage that only has become worse:
A higher minimum wage has the biggest impact on those with the least experience or the fewest skills. That means in particular those looking for entry-level jobs, especially teenagers. And sure enough, as nearly all economic models predict, the higher minimum has wreaked havoc with teenage job seekers, well beyond what you would expect even in a recession.
The numbers simply are depressing. For all teenagers the number is about 26 percent, and for black male teenagers, it’s over 50 percent. This is not due just to increases in the minimum wage; many African-American teens live in the inner cities, which are not citadels of commerce.
Barrier to Entry
Nonetheless, a minimum wage that exceeds many teens’ marginal productivity is a barrier to entry into the workforce. Unfortunately, too many people not only fail to see the role of government in creating this crisis, but also believe that government can solve it. Writes financial journalist David Schepp:
A program such as the Depression-Era Civilian Conservation Corps, which put about 3 million young men to work in the 1930s, could go a long way toward putting youth to work in public works projects. CCC provided work experience and income to a generation of inner-city youth who might have otherwise been lost, (Prof. Michael W.) Brandl says.
I agree that the consequences of keeping young people out of the workforce can be severe, but we have to understand that government policies are to blame, and to expect government to solve the problem it created with more intervention is insanity squared. Contra FDR, the laws of economics cannot be breached with impunity
by State policies any more than King Canute could order the tide not to rise.
Pingback by Is Anyone Shocked by High Teenage Unemployment? on 18 August 2010:
[...] because I wanted to work and earn my own money. Its rare that you see that kind of drive anymore. Is Anyone Shocked by High Teenage Unemployment? | The Freeman | Ideas On Liberty Blog: http://libertarianblue.blogspot.com/ Cynics are the mortal enemy of politicians, [...]
Comment by Miles on 18 August 2010:
As an amateur economist, I’ve always tried to slip in the usual free-market appeals in conversation when appropriate. I’ve found over the years that “minimum wage” is probably THE most misunderstood economic/political concept. Cause-and-effect logic is never invoked – only knee-jerk emotion. The words “fair” and “living wage” usually surface somehow.
Comment by Prentiss Davis on 18 August 2010:
In a truly free society, government has no role in employment; a free and voluntary exchange of time and service for compensation. Government should only become involved if the employer fails to fulfill his obligation to the employed, as was the voluntarily previous agreement.
Comment by Jon Thorp on 18 August 2010:
The corollary of high teenage unemployment must be remembered as well. Many small businesses, especially those in lower income areas, depend on seasonal or transient low-skilled workers. My own work experience started at a restaurant as a busboy and dishwasher. I was making around four bucks an hour but to me that was a gold mine since I had no bills. But were it not for low-paid workers such as myself, many of these businesses in my small town would likely have closed down. In sum, not only do teenagers miss the opportunity to gain valuable work experience and the importance of good spending habits but many small businesses are prematurely ended or never even get the chance to start.
Being the “Land of the Free,” America needs to recognize the rights of all men, women and children to enter into any contract they see as beneficial and reasonable.
Comment by James Madison Fan on 18 August 2010:
My first job was working for a catering business followed by managing a pizza joint. These were temporary jobs I did because I wasn’t educated or skilled then I moved on. The same is true for most of my friends. Today those same positions are not filled by a seasonal influx of teens that move on after a couple of years, they are filled for years by adult illegal aliens.
This is why the Democrats in particular keep discussing a “fair wage” or a “living wage” because the Obamacrats think every job is supposed to be able to buy a house. It is not a part of their paradigm that there are positions one fills as part of a process leading to a “real job” where you can support a car, mortgage, and family. In their reality all jobs should be able to do this.
What they don’t get is that increasing the minimum wage doesn’t do what they think it does or they’re just lying in an effort to mollify their less than enlightened constituents. All that increasing the minimum wage does is move the entire curve to the right. Supply remains the same. Demand remains the same. The floor goes up. The ceiling goes up. Obama could raise the minimum wage from $7.00 an hour to $70 and all that happens is the cost of everything goes from X to 10X. The fast food guy can’t afford a house at $70 an hour because the $250,000 house bumps to $2.5 million.
The legendary “Living Wage” is every bit as mythological as dragons and pixies. Every time Obamacrats bump the minimum wage an equal bump in inflation will follow shortly thereafter.
Comment by KL Simmons on 18 August 2010:
In my youth, when I was foolish enough to think that working hard actually got you ahead, I worked my butt off. I worked two jobs and was reduced to stealing food from one place of employment in order to eat. I wasn’t hoping to buy a house, I was just trying to put food in my stomach and not get evicted from my roach-infested slum apartment. I don’t think it’s too much to ask from wages that they not leave you homeless and starving.
Eventually, and this will no doubt please you immensely, I was forced to join the military and become disabled for life in order to earn a living. In the long run, I came out better off, I think, and I can at least manage to support myself. I could do without the constant pain and inability to do things I used to enjoy, however.
I’ve been reading a lot of the material on libertarianism and I find it quite interesting. But it doesn’t answer the question of what single young adults who need to support themselves are supposed to do. Eliminating the minimum wage will leave them homeless. Wages will plummet, benefits will disappear, and we’ll be in a modern-day Guilded Age. Should these people live in communes or something until they become ‘real’ humans worthy of sufficient wages to live on? Stay home with mommy and daddy? Bring back the extended family support system? What is the solution offered for this by libertarianism?
Comment by R Middleton on 19 August 2010:
I’m not sure it’s so much an age thing as where they are in the training cycle. I graduated ‘summa cum laude’ with a two year computing degree in 2002, at the age of 52, and could not even find an internship. The oligarchy has many subtle ways of moving the goal post to protect their own. The core problem is the economics of population or shear numbers. Over supply lowers value.
Bullying by the government only aggravates the problem by dampening the feedback mechanism.
Comment by KL Simmons on 19 August 2010:
R Middleton -
Thanks for answering me.
I’m not sure what you mean by the ‘training cycle.’ One of the delightful jobs I had was at McDonalds, of course, and I vividly remember our main grill cook had a doctoral degree in Physics. Fry cook had a Masters Degree in computer engineering. I was a relative ignoramus with my B.A. We were all making $3.15 an hour in 1991. The rent in my particular slum was $350 a month, plus utilities. Mercifully I didn’t have any unfortunate children to care for.
When I consider the ramifications of eliminating the miniumum wage, I remember what Adam Smith wrote in “The Wealth of Nations.” One of the indicator of the surplus or shortage of labor was starvation rates among young chilren. If enough children weren’t starving to death, there was a labor shortage and labor was therefore “too expensive.” Is this how we want to measure our economic health in the 21st century?
Comment by James Madison Fan on 19 August 2010:
KL,
I can sympathize since I managed a Little Caesars while going to college. My major was Management Information Systems.
There are several issues you raise that I’ll do my best to address. The first is the minimum wage. The fact is that there is no benefit to the minimum wage to workers. If you are making burgers for me at $1.00 per Big Mac and renting an apartment from me for $350 a month when they raise the minimum wage by 10% all that happens is I raise the price of my burger to $1.10 and raise the rent on your flat by $35 a month because Supply and Demand remain the same so your paycheck got larger but it buys the same thing your previous check did. You can’t change Economic law any more than you can change the laws of Thermodynamics.
The thing that needs to change to increase the value of your labor is an increase in the scarcity of labor. Fewer people competing for more jobs means the value of labor goes up which means wages and benefits go up.
The thing you have to ask yourself is why were you making the same or less in 1991 at McDonalds (relative to inflation) that I was making in 1984 at Little Caesars? Why is it that there are jobs “Americans won’t do?” Americans used to do these jobs so why won’t Americans do these jobs now? Why is it that unskilled labor is less valuable in 2010 when comparted to the 50′s, 60′s, 70′s, and into the 80′s?
My grandfather was able to buy a home, car, raise a family of three, and put two kids through college loading soap into a truck for Proctor and Gamble. That same job wouldn’t put food on the table and a roof over the head of the most frugal bachelor in 2010.
The “training cycle” Mr. Middleton refers to is how much experience you have in your field. There is a big difference between theory and practice so veteran employees are usually more desireable than those fresh out of college. I would suggest that his age contributed to his inablility to find a position as well since he was only 13 years away from retirement.
Just as there are different kinds of Republicans and Democrats there are also different types of Libertarian. Some seem to embrace Draconian Capitalism similar to what you outlined in your post. Most try to find more socially acceptable ways to express this view such as offering that the less fortunate will be taken care of by voluntary means such as religious charities.
I find this secretly amusing since this attitude is exactly what Dickens was parodying with the character Scrooge: “If they would rather die, they had better do it and decrease the surplus population!”
On the other hand I think the fixation of Americans to push their children out of the home come 18 is every bit as short sighted. I’m not saying kids should be allowed to remain at home until they’re 40 with multiple generations living under the same roof but allowing them to establish a financial base starting with a real career rather than expecting them to survive on their own working fast food or similar jobs is a recipe for disaster. This isn’t “Happy Days” any more where you can have a life working at “Arnolds” and it is about time we figured it out.
Pingback by Teenage unemployment and the minimum wage on 20 August 2010:
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Pingback by The Freeman: Je někdo šokován vysokou nezaměstnaností mladých? : Devian.cz – Pravá volba on 20 August 2010:
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Pingback by Save Us From Rand Paul! on 23 August 2010:
[...] DARE anyone even utter words about a law that has helped create record teenage unemployment! As for the civil rights criticism, he questioned whether or not state agents should have the power [...]
Comment by KL Simmons on 23 August 2010:
James Madison Fan:
Thank you for your input. Your comment of why my wage in 1991 was equal to or less than yours in 1984 reminded me of a statistic I have read reference the actual value of the minimum wage being the lowest in terms of buying power since the 50s. That may no longer be true since the feds raised minimum wage a couple of years ago. But it does raise the question of why the value of a minimum wage has declined in terms of buying power, when more and more people need to actually live on it rather than save money for school clothes.
Many families are having to take back in their previously self-supporting offspring. I know I had to go crawling home to my mama when I was 20 and I never in my life felt so humiliated. But I’ve seen folks in their 50s swallow that humiliation and move in with the parents because there’s just no way to make a living these days. I read that last year the number of households in the United States declined significantly, owing to people having to share living quarters, move in with relatives etc. Living independently has become quite a luxury. The trend may have been arrested in some part by laws that allow landlords to limit the number of renters to two per bedroom, thus rendering it impossible to house ten people in a three-bedroom apartment. But the alternative is tenement-style living, and I’m sure no one wants to see that either.
Comment by Sam Plunkett on 25 August 2010:
Too many rules, made by out of touch fools. The government in the United States and in many of our states, is out of control, too big, and too powerful. And you know what? We let it get that way by not protesting these laws. Freedom is very restricted now in this country, and illegal laborers are let in, while citizens, especially teenagers are not allowed to work, or are not hired because they are not sufficiently productive. The founding fathers warned us, and we ignored it.
Comment by Lisa on 27 August 2010:
Humm…
Comment by Lew on 27 August 2010:
Is it so humiliating to live with your parents? Oh no, the shame! Are you serious? But getting largesse from the federal government- now that is prideful! Why do you hate your family so much. I am in college now, and I live with my parents during the summer. I am not ashamed. I love my family.
Comment by lisa on 28 August 2010:
I don’t know much about about economics. I’ve been too busy working.
I did get a degree in English 15 yrs ago. Although Keats was enlightening and I was almost smart enough to understand Shakespeare no job offers came in. Darn the government. I had to take a menial job selling makeup in the mall. It just wasn’t fair. I was cute too. To add insult to injury the job only paid 8 bucks an hour. I had to live with whacked out girl roommates, drive an orange Phoenix and eat oatmeal for dinner. No American should have to live like that. Eventually I became an esthetician. I made 20 an hour. Now I could live by myself and support a dead beat husband. But I won’t get into that. However I couldn’t afford a bed. So I slept on the floor for 5 yrs! Now I’m sounding more like a common loser. As the years went by I got really good at giving facials. I gained a clientele. But how I had to work. There should be a law against how hard I worked. Like I said I’m cute and American. With time I started my own business because I figured out I would make more money. It takes a high IQ to figure these things out. So for the past 10 years I’ve honed my skill, worked 6 and 7 days a week, missed vacations and a lot of socializing. Yeah I know it sounds really unfair. Guess what I got out of all of that? A business that brings in 50k a month.
So what’s the lesson? “Despise not the days of small beginnings.” We don’t live in a fair or perfect world. Quit your belly aching a grub like the rest us. This is life for everyone, especially teenagers. It’s unfortunate but nobody deserves anything for free. Aside from mentally and physically impaired people, I believe that in this country you can have just about anything you want….. if you pay the price. If it takes working 3 jobs and 15years of menial labor to figure this out then so be it.
Comment by RogerLig on 28 August 2010:
I can’t think of a better way to insure that jobs will be sent to China (likely never to return) than to make them too expensive to keep in the US. Why pay $9.50 per hour when the very same work will be done, gladly, in China for 1/10 of that?
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