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Pricing the young out of jobs

By ANDREW MARKOWSKI

Publication: The Day

Published March 15. 2013 4:00AM

According to the state Department of Labor, unemployment among residents under 25 years old has fallen farther than any other cohort since 2007. The next steepest decline has been among workers aged 25 to 34. In other words, Connecticut's struggling economy has been hardest on younger workers. Despite that, lawmakers in Hartford are gearing up again to try to raise the state minimum wage, a mistake that will almost certainly make a bad trend worse.

The DOL report doesn't really explain the reason for declining employment among younger workers, although it points out the cyclicality of certain industries like construction and seasonal businesses. It fails entirely to consider whether Connecticut's minimum wage is a factor. No matter. Academics and think tanks have studied the question for decades and from that research we can make some assumptions.

First let's remember that Connecticut has the highest minimum wage in the region at $8.25 per hour. Researchers from the University of California, Irvine, have found that unemployment goes up when the minimum wage is increased and that the youngest workers are most affected.

There are several likely explanations. First, employers seeking to avoid the additional cost very rationally eliminate the entry-level positions. The jobs that disappear, then, are exactly the jobs for which younger workers are qualified.

The effect of a higher minimum wage isn't confined to minimum wage jobs. Existing workers who are making the minimum wage expect and deserve to be paid more than new employees who have less experience, fewer skills and less seniority. Raising the minimum wage puts pressure on employers to raise wages all the way up the scale. One way to prevent that kind of inflation is to avoid creating entry-level positions.

Another factor working against younger job seekers is increased competition. Raising the minimum wage makes entry-level jobs more attractive to older workers, especially if they're unemployed or looking for part-time money. As the pool of candidates grows, the competition for the lowest jobs gets more intense. Younger workers with the lowest skills and least experience find themselves competing against older workers with higher qualifications and more maturity. In other words, raising the minimum wage prices younger workers out of the market.

Labor studies make the point. According to the University of San Diego, the large majority of minimum wage employees in America don't come from poverty, as some advocates suggest. In fact, a majority come from middle-class and even affluent households. The same research shows that a large majority of Americans living below the poverty line don't have jobs at all. So raising the minimum wage is a decidedly inefficient anti-poverty policy. Its benefits often go to people who are not in desperate need and it has little to no significant impact on those in poverty.

Moreover, because it wipes out entry-level jobs, raising the minimum makes it harder for young people to find their first jobs, learn basic skills and gain the necessary experience and employment record to move up the ladder of success.

Connecticut's economy lags behind most other states even as some national trends are beginning to turn upward. Its unemployment rate remains stubbornly high and small businesses here, which have traditionally created most of the jobs, are finding it harder to bear the high taxes and costly mandates already in place. Raising the minimum wage again will harm businesses and job seekers in Connecticut who are already at a disadvantage.

Andrew Markowski is Connecticut director for the National Federation of Independent Business (NFIB), an advocacy group representing several thousand small businesses in the state.

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