The summer of Illinois teens' discontent
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Illinois parents, prepare yourselves: With a 28.6 percent teen unemployment rate heading into the summer of 2013, your jobless kids might be making frequent cash withdrawals from the Bank of Mom & Dad for their vacation spending.
There are a number of factors at work: More competition from older jobseekers, for instance, has put young and inexperienced applicants at a competitive disadvantage. But also at fault are a series of ill-conceived minimum wage mandates at the state and federal level, which raised the cost to hire and train the teens who fill those jobs.
Those same teens can only hope that politicians in Washington or Springfield won't make it worse by following through on another proposed increase.
Nationally, teen unemployment has been above 20 percent every summer since 2009. That's four straight summers — soon to be five — of record teen unemployment. And tellingly, they've all occurred during or since the 40 percent hike in the federal minimum wage between 2007 and 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 hike. In Illinois specifically, which has adjusted its minimum wage multiple times independent of the federal level, over 11,000 teen jobs have been lost due to mandated wage increases since 2005.
One need only look at the businesses where teens are employed to understand why. Roughly 35 percent of the state's employed teens work in the leisure and hospitality industry (think restaurants, movie theaters, hotels), while another 27 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.
When raising prices isn't an option — good luck with that in a rough economy — the only option is to provide the same product with less service. This might mean having waiters or waitresses bus their own tables, or opting for a self-service alternative to young grocery baggers.
The data bear this trend out. Illinois teens' share of employment in the leisure and hospitality industry dropped by over 30 percent between 2008 and 2011. In retail, it's fallen by nearly 29 percent during that same period.
This makes it all the more baffling that wage hike advocates in Congress and the Illinois statehouse would seek to raise the minimum wage even further.
This may be good politics, but it's certainly not good policy. Teens start climbing the employment ladder through their first summer jobs. Further minimum wage hikes only postpone their ability to get these jobs, which research shows hurts their future earnings, employability and professional development.
That might not seem pressing to the teens who will just lie by the pool or lounge on the couch for the next three months. But it is much more concerning for their parents, who want nothing more than a good future for their kids — and maybe even some peace and quiet between now and September.
• Michael Saltsman is research director at the Employment Policies Institute, a Washington, D.C.-based nonprofit dedicated to studying public policy issues surrounding employment growth.
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