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Glenn Oppel Minimum Wage Op Ed Final
Glenn Oppel Minimum Wage Op Ed Final
Glenn Oppel Minimum Wage Op Ed Final
By Glenn Oppel, Policy Director, Montana Policy Institute Helena - As the Great Recession persists, unemployment remains a key concern in Montana and the nation as a whole. Although the jobs situation in Montana is somewhat better than the national average, the unemployment rate for working-age teens (16-19) is historically very high. Moreover, fewer and fewer teens are actually entering the workforce. Weve found that one reason teens are not finding employment is that theyre being priced out of the labor market. From 2006 to 2011, the teenage unemployment rate almost doubled from 10.2 percent to 19.4 percent. Meanwhile, the average hours worked per week for Montana teens fell from 12.1 to 8 hours a decrease of 34 percent. The percentage of Montana teenagers who had a job declined from 48.2 percent in 2006 to 36.6 percent in 2011. Teen employment share in all industries dropped from 6.3 percent to 4.2 percent. It may ruffle some feathers to say it, but one of the key factors contributing to teen unemployment here is a 43 percent increase in the state minimum wage from $5.15 in 2005 to $7.35 in 2011. While accounting for the effects of the recession, analysts at the Employment Policy Institute recently calculated that minimum wage increases over that period alone caused the loss of 1,178 jobs for Montana teens. With more economic woes and more minimum wage increases on the horizon, teens should not expect their job prospects to improve in the foreseeable future. What proponents of perpetual minimum wage increases overlook in their zeal to ostensibly help the least fortunate among us is that disregarding market forces can often lead to unintended consequences. Minimum wage proponents completely ignore the forces of supply and demand. Labor is just like any commodity in that when you increase its price, consumers will demand less of it. Why would policymakers want to decrease the demand for labor when people are most in need of jobs? Employers generally react in predictable (and rational) ways when faced with annual increases in the minimum wage. Their initial response is to compare the increased labor costs to the value of labor productivity. If the productivity of a particular worker is $6.50 per hour but the federal or state government forces an employer to pay $7.65 per hour, it stands to reason that that worker is going to lose their job. In a recession when profit margins are shrinking and cost-cutting measures become more necessary, perpetual minimum wage increases only exacerbate job losses for unskilled workers. In industries where consumers are less sensitive to price, businesses may raise their prices to keep up with rising labor costs. Doing so may enable employers to maintain hiring levels, but continuing upward