Sunday, February 05, 2012

The Minimum Wage, Again
Perhaps because of political pressures rising out of the Occupy movement, perhaps just because it's an election year and the Democrats really would like another shot at the State Senate majority, there's a move afoot to raise the statewide minimum wage in New York to $8.50 per hour. The majority Democrats in the Assembly led by Speaker Sheldon Silver are pushing the measure, to which the Republicans and the business community are putting up predictable resistance. The likely support of both Governor Cuomo and, much more surprising to me, Mayor Bloomberg, would seem to indicate it has a good shot of being enacted.

It won't surprise that I'm generally of the view that the minimum wage should be indexed to inflation (which one iteration of Silver's proposal would do), and skeptical of the oft-repeated claims from the Right that raising the minimum wage stifles job creation. I know (and like) both of the experts cited in the Times article linked above; I'm much closer to James Parrott's position that a higher minimum wage serves as stimulus by circulating more money within communities where low-wage workers are concentrated. (It's kinds of disconcerting that Rus Sykes, who's an old friend and a former co-author of mine, is now on the anti- side of this issue; from the wording of the article, I'm hoping that Rus's concern is with the magnitude of the wage.)

That said, there is one aspect of a prospective minimum wage increase in New York City that really concerns me: what the impact would be on youth employment.

The City administers and, at this point, provides a plurality of the funding for the Summer Youth Employment Program, a six-week, 30-hour work opportunity for eligible NYC residents ages 14 to 24. Participants are paid the minimum wage of $7.25 per hour. SYEP is by far the largest youth employment program in the country, but the crap economy accelerated a long-term trend of disinvestment and the program enrolled only 30,628 participants in 2011, down from a high of more than 52,000 in 2009. (Don't let anyone tell you the American Recovery and Reinvestment Act--the "stimulus"--didn't do anything. That thing did an enormous amount of good, and its reversal, albeit temporary, of the trend toward falling rates of youth employment was among its big wins.)

The math that follows is hacky and not meant to be taken literally (for instance, few participants work the full 180 hours), but illustrates the point:
Total funding for SYEP in 2011 was $43.5 million. The cost per participant was $1,420.27. Wages at the minimum for six weeks and 30 hours per total to $1,305, with the rest going toward administrative costs. If the wage is $8.50 rather than $7.25, the total cost for 180 hours of work becomes $1,530, and keeping the admin costs steady the total per-participant tab rises to around $1,650. Divide $43.5 million by that number, and suddenly you only have 26,364 young New York City residents working summer jobs.

This matters because the labor market in NYC is such that if you're a poor kid and you don't get a summer job through this program, you're not likely to work at all. Extensive research conducted by the Center for Labor Market Studies at Northeastern University has shown that the likelihood of working as a teen rises with household income (and is higher anyway for whites than non-whites). More than three quarters of the SYEP participants surveyed reported that they wouldn't have worked were it not for SYEP; if anything I suspect the kids were too optimistic about their chances of finding alternate employment. Poor kids from poor communities simply aren't as likely to have the social capital or neighborhood opportunities that often lead to summer work as a teen.

In turn, this matters because work, as the CLMS also has found, tends to be habit-forming: do it at 15 and you're more likely to do it at 16. Work at 17 and you're probably have a job at 18, and so on. Part of this is probably that one gets accustomed to and expectant of having that extra spending money; more of it is that one starts to figure out how to function in a workplace, and having had a job once, it's not so unreasonable to expect to secure a different one again. This doesn't always work out, but the odds both of subsequent employment and at least baseline academic attainment rise with incidence of work in the teen years.

Which brings us back to the minimum wage question. My strong belief is that it's more important for kids from low-income families in New York City--which had the lowest teen employment-to-population ratio by far among the 20 biggest American cities as of 2005, with no reason to think it's changed much since--to have any paid work experience than that they earn the same wage as an adult who's very possibly the main or co-equal wage earner in the household. I wouldn't trust myself to do it, but I'm fairly sure one can monetize the gains and costs attached to different levels of early work experience for youth from disadvantaged backgrounds, in terms of subsequent educational attainment, employment and contributions to the tax base versus costs for social services provided, incarceration, and shelter. An extra four or five thousand kids each year who don't work as a consequence of the higher minimum wage likely would undo a lot of the good brought about by a higher minimum wage for everyone else.

I'm not sure what the answer is. I suppose a lower minimum wage for teens, or some kind of tax benefit for businesses who hire youth workers, might serve the goal of maximizing teen exposure to the job market without altogether having to forego the benefits of a wage increase. Whether this is legal or politically palatable, I'm not sure.

1 comment:

The Navigator said...

Is there research looking at whether min- or sub-min wage teenagers displace adult workers? With or without a subsidy? I wouldn't be terribly concerned about it on a large scale - there's really only so much that teenagers can do to be helpful to a business - but on the other hand you'd think that if there were displacement, it'd be among the least-skilled cohort of adults, i.e. the ones least able to find alternative work and probably the ones most in need of low- or no-skill jobs.

Which isn't to detract from your point - the SYEP sounds like a very good program. Three cheers for public job programs! At least for the hard-to-employ.