GUEST COMMENTARY: Minimum wage hikes mean minority unemployment

2013-06-26T00:00:00Z GUEST COMMENTARY: Minimum wage hikes mean minority unemploymentBy Michael Saltsman
June 26, 2013 12:00 am  • 

Urban League President Marc Morial recently announced his organization’s support for an increase in the federal minimum wage to $10.10. Though Morial believes the higher wage will assist urban areas like Gary and Chicago that his organization represents, the evidence tells a different story.

Nationally, the unemployment rate for all teens has been above 20 percent every summer since 2009; it’s 22.9 percent in Indiana and 28.5 percent in Illinois. But for black teens, unemployment has been above 30 percent over the same period. 

Tellingly, these disheartening numbers have occurred during or since the 40 percent hike in the federal minimum wage — which rose in three steps from $5.15 an hour to $7.25 — from 2007 to 2009.

The timing is more than just coincidence. Writing in 2010, economists at Miami and Trinity universities estimated that — even accounting for the effects of the recession — at least 114,000 young adults lost job opportunities as a direct result of federal wage hikes. (Other economists have put that figure above 300,000.)

One need only look at the businesses where young adults are employed to understand why. Roughly 40 percent of employed teens work in the leisure and hospitality industry (think restaurants, movie theaters and hotels), while another 25 percent work in retail jobs at grocery stores, service stations and the like.

These types of businesses aren’t exactly rolling in the dough. Their profit margins are generally 2 or 3 cents on every sales dollar. Sudden spikes in labor costs — like a 40 percent jump in the minimum wage in two years — leave these businesses with two options: Raise prices or reduce costs.

This might mean having waiters or waitresses bus their own tables or opting for a self-service alternative to young grocery baggers.

The data bears this trend out: Teens’ share of employment in the leisure and hospitality industry dropped by more than 20 percent from 2007 to 2011. In retail, it’s fallen by nearly 30 percent over that period.

These losses can be devastating for a teenager’s future. Teens — no matter where they live — start climbing the employment ladder through their first summer jobs. Further minimum wage hikes only postpone their ability to get these jobs.

Most parents, whether they’re in Chicago, Gary or anywhere else, want nothing more than a good future for their kids, and attaining that future means part-time work experience now is crucial.

Unfortunately, the minimum wage proposal supported by Morial and the Urban League will only put those opportunities further out of reach. 

Michael Saltsman is the research director at the Washington, D.C.-based Employment Policies Institute. The opinions are the writer's.

Copyright 2014 All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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