Even though New Hampshire’s minimum wage remains unchanged at $7.25, lawmakers recently made big changes to the state minimum wage law. They repealed the existing law and tied the state minimum wage to the federal minimum. The bill's sponsor, Rep. Carol McGuire (R-NH), says that, "[Minimum wage laws are] very discriminatory, particularly for young people." She argues that more young people would be able to get jobs if they were paid something lower than the minimum.
Of teenage workers, Rep. McGuire also said, less flatteringly, "They're not worth the minimum [wage]."
Her comments may sound harsh, but she's exactly right. A lot of part-time work simply isn’t worth the $7.25 that the government requires employers to pay.
Teenagers are less productive than older workers because they have fewer skills and education. Workers who are less productive create less value for employers, and that's why they are paid less.
Minimum wage laws are bad policy because they hurt the very people they are trying to help — teenagers and low-skilled workers. This group is hurt the most by the minimum wage because their productivity is often not high enough to justify the cost to employers. Minimum wage hikes raise the cost of labor, so employers choose not to hire as many people. National employment data clearly shows this. When government raised the federal minimum wage from $6.55 an hour to $7.25 in 2009, for example, it resulted in big losses in part-time employment, which is precisely the kind of work that teenagers seek.
As further evidence, the Wall Street Journal recently highlighted a study that shows that minimum wage hikes cause teenagers to lose their jobs. Labor economists William Even of Miami University and David Macpherson of Trinity University found that each 10% increase in the state minimum wage reduces employment by 2.5% among white males who are 16-24-years-old. The figure is 1.2% for Hispanic males in this age group, and 6.5% for black males in this age group. The authors also found that more 16-24 year-old black males lost their jobs due to minimum wage hikes than the recession.
Not only do minimum wage laws mean that fewer people can find jobs when they are young, they hurt these young people when they try to get jobs later. This was the conclusion of a 2007 study in the Journal of Human Resources. According to the study, young people who live in areas with high minimum wages are less likely to get the training and experience they need when they were young, which leads to worse career options later in life.
Even supporters of minimum wage hikes recognize that a tradeoff exists between unemployment and the minimum wage. If they didn’t understand this, then they would demand an even higher minimum wage. As Steve Chapman has argued over at Reason, “If you can force employers to pay higher wages without reducing employment, why set the minimum at $7.25 an hour? Why not $17.25? Why not $37.25?”
It may not seem intuitive, but lowering the minimum wage is a step in the right direction because it encourages employment among teenagers and low-skilled workers. Lawmakers in other states would be wise to follow. Overall living standards will benefit if lawmakers focused on policies that lift all boats, instead of simply moving wealth around. If policymakers are serious about raising the standard of living, then they should enact policies that keep the cost of doing business low, which will enable businesses to hire more young people.
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