Exemption from Minimum Wages Would Help Younger Workers
On New Year’s Day, some twenty-one states across America increased their minimum wages, bringing the total number of states with minimum wages above the federal level to twenty-nine. While proponents of government wage-setting celebrated the increases, young people have reason to worry. Low-paying jobs can provide invaluable workplace experience to teenagers just starting their careers. Higher minimum wages limit the availability of these entry-level jobs, as employers are forced to hire fewer people for higher wages.
A little-known federal law designed to mitigate these negative effects is the youth minimum wage. The law allows employers to pay a subminimum wage of $4.25 an hour (59 percent of the regular federal minimum of $7.25 an hour) to workers under 20, for a period of up to 90 days. While this exception is a small one, it does provide a window of opportunity for young people who want to work but can’t find jobs that match their skill sets and also pay the minimum wage or above.
Unfortunately, the real-world applicability of this law is complicated by state minimum wage laws. Many states are not waiting for Congress to raise the federal minimum wage—as we saw on New Year’s Day, a large number are plowing ahead with their own state-level increases. Several states, however, have neglected to include an exemption for young workers, rendering the federal youth minimum wage obsolete.
Only nineteen states have a youth minimum wage at the federal youth minimum level of $4.25. Not all of these youth minimum wages are created equal. Vermont, for example, limits youth minimum wage eligibility to full-time high-school students. Eight states have a youth wage between the federal youth rate and the regular federal rate, while twenty-three states plus the District of Columbia have a youth wage at or above the federal minimum wage of $7.25 an hour.
The highest minimum wage for young people belongs to Washington State, which does not create an exemption for youth workers and subjects all employees in the state to the same minimum of $9.47 per hour. The unemployment rate for teenagers in Washington State was 31 percent in 2013, almost 10 percentage points higher than the national rate. In Washington and other states with high minimum wages, young aspiring workers are finding themselves shut out of the labor force.
The link between higher minimum wages and youth unemployment is well-documented. A 2013 paper by Texas A&M University professors Jonathan Meer and Jeremy West found that the negative effects of higher minimum wages on job growth are strongest for young workers—while seeing hardly any effect for workers over 35. A December 2014 study by University of California (San Diego) professors Jeffrey Clemens and Michael Wither concludes that increases in the minimum wage reduce the likelihood that low-wage workers will make it into the middle class, since higher minimum wages deprive many workers of jobs and experience.
Over half of workers who earn at or below the federal minimum wage are below the age of 25, meaning that unemployed youth would benefit immensely from programs that allow them to earn subminimum wages. Unfortunately, state laws do not reflect this reality.
Increasing youth employment should be a top priority for policymakers at the state and federal levels. The labor force participation rate among 16 to 24-year-olds in 2013 was 55 percent, and the Bureau of Labor Statistics projects this number to slip below 50 percent in 2022. Employers are increasingly looking for work experience rather than college major when hiring, making that first job all the more important for upward income mobility. Rather than “protecting” young workers from “unfairly” low wages, policymakers should recognize that low-paying jobs are the first stepping-stone for young people on the way to a better life.
It is not too late for states to add special minimum wages for youths or teens to their legislation. In addition, new state minimum wage legislation should include a youth minimum wage exemption in line with the federal law. At the national level, Congress should consider raising the age cap for the youth minimum wage and lengthening its 90-day limit, to allow as many young people as possible to take advantage of the law. While increasing the wages of America’s lowest-paid workers is an admirable goal, it shouldn’t come at the cost of massive youth unemployment and an out-of-reach first rung on the economic ladder.
Preston Cooper is a contributor to Economics21. You can follow him on Twitter here.
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