Minimum wage, jobless kids

The U.S. Congress recently voted to raise the federal minimum wage to $7.25 (R51.33) an hour by 2009, in the name of helping low-income families escape poverty. But a new report from the New York City-based Center for an Urban Future shows how minimum-wage laws are already hurting the unskilled and inexperienced, says the Wall Street Journal.

The "Summer Help" study assesses New York City's publicly funded Summer Youth Employment Program (SYEP), which each year matches tens of thousands of young people between the ages of 14 and 21 with employers ranging from the local library to investment banks:

  • New York's teen employment rate is 16.9 per cent, the lowest of any big city and half of the 34.6 per cent national average.

  • Today, however, the New York program serves 20 per cent fewer young adults than it did in 1999, and last year it turned away 30,000 mostly black and Latino applicants.

    The report cites minimum wage-increases in the Empire State – one of 30 states that mandates a minimum higher than the federal floor – as a factor in the programme's decline.

    "The higher state minimum wage that went into effect in 2005," writes author David Jason Fischer, "added to the challenge of funding SYEP by increasing the cost per participant, making it difficult to keep SYEP enrolment levels the same without year-over-year budget increases or additional administrative cuts." New York's minimum wage increased once again this year to $7.15 (R50.62) from $6.75 (R47.79), adding another $3.5 (24.78) million in costs.

    The harm from minimum-wage laws is well-documented and even government job programmes aren't immune. As an antipoverty measure, these laws are inefficient because most people who are poor already earn more than the minimum and most who do earn the minimum aren't living in poverty, says the Journal.

    Source: Editorial, Minimum Wage, Jobless Kids, Wall Street Journal, July 3, 2007.

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    For more on Economic Issues:

    FMF Policy Bulletin/ 10 July 2007
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