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Michael Saltsman

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A Training Wage Might Get Teens Off the Couch

Posted: 06/04/2013 4:24 pm

It's tough being a teenager in this economy. Teen unemployment has been above 20 percent for the past four summers, and it's currently hovering near 24 percent. If you're a teen in California, it's even worse -- 32.5 percent of 16-19 year-olds that would like to work are instead stuck on the couch.

So here's an outside-the-box proposal to get our young people back in the workplace: Let's make teens less expensive for employers to hire. Let's lower their minimum wage.

Here's the logic: Young adults are overwhelmingly employed in industries that keep just a few cents in profit for each sales dollar. One quarter of employed teens work in retail; nearly 40 percent work at businesses like restaurants and amusement parks. Unfortunately, the cost to hire and train these young people has been rising due to increases in the minimum wage at the federal, state, and even local level. (In San Francisco, it costs nearly $22,000 a year to employ a young person full-time at the minimum wage. And that's before mandated benefits and taxes are added in).

Faced with price-conscious customers, employers' only option in the face of higher labor costs is providing the same product with less service. That means fewer entry-level jobs for the teens who used to provide that service.

But a training wage set at a lower percentage of the full minimum wage could help solve this problem.

For instance, a teen that was unaffordable to hire and train at $10.55 (the hourly minimum wage in San Francisco) could find themselves with more opportunities at a wage that was half of that. There's also some evidence (from a study published in Cornell University's labor economics journal) that training wages at the state level can moderate the negative employment effects of increases in the minimum wage -- a particular concern in places like San Francisco where the wage goes up almost every year.

At the federal level, creating a robust training wage would just require a small change to current policy. A "youth minimum wage" already exists, but it's limited to a brief period after the young person is hired; after that, the full minimum kicks in, blunting much of the benefit that such a policy would have. Removing that time limit could allow employers and employees to take full benefit of the training wage provisions, and allow teens to keep their jobs well beyond the summer.

But it's also necessary for more states to get on board. High-minimum wage states like Washington currently prohibit a training wage, leaving the state's teens -- who face one of the country's highest unemployment rates at 27.9 percent -- with little recourse during the summer months.

Getting more young adults in the workplace is something we should all support. To take one example, research has shown that a senior in high school holding down a part-time job earns higher wages and better benefits later in life than their jobless counterparts. That means a teen minimum wage that increases job prospects now -- even if it's less than the standard minimum wage -- will pay off in the future, potentially in a big way.

But keeping them on the couch this summer will have the opposite effect. The teens that can't find work won't have as bright a future as the ones that can. That's bad news not only for them, but also for the economy as a whole--to say nothing of the parents who just want their kids to get out of the house between now and August.

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Michael Saltsman is the research director at the Employment Policies Institute. The Employment Policies Institute also runswww.minimumwage.comandwww.tippedwage.com, which explore the relationship between wages and employment.

 
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