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Pittsburgh teens: No jobs for you

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By Michael Saltsman
Wednesday, Dec. 25, 2013, 9:00 p.m.
 

Last Friday, President Obama met with mayors and mayors-elect from 16 of the country's major urban centers — including mayor-elect Bill Peduto from Pittsburgh — and endorsed a higher minimum wage as a policy that “could have a tremendous boost in a lot of cities.” Many of those attending were already convinced. The mayors-elect of Seattle and New York City, for instance, both endorsed dramatically higher minimum wages during their campaigns.

But this moment of agreement on a feel-good policy that's supposed to help the poor couldn't be further detached from one hard empirical reality: Urban unemployment rates for young adults remain sky-high, and dramatically raising the minimum wage will only put opportunities further out of reach.

Nationally, the unemployment rate for all teens aged 16 to 19 has been above 20 percent for over five years, and it's currently 21 percent. But in the Pittsburgh metropolitan area, the numbers are dramatically worse: Over the past year, the unemployment rate has averaged 24 percent, as Pittsburgh teens find the first rung on the career ladder harder and harder to reach.

It's a cruel irony that the policy that's supposed to help the least advantaged has become an obstacle to their employment. But the real-world evidence is hard to ignore.

Economists at Miami and Trinity universities estimated that — even accounting for the effects of the recession — at least 114,000 young adults lost job opportunities as a direct result of the 40 percent federal minimum wage hike between 2007 and 2009. Their work is consistent with the vast majority of academic research on this subject.

To understand why jobs are lost, look at the types of businesses that employ people at the minimum wage. Census Bureau data show that roughly 40 percent of teens work in the leisure and hospitality industry (think restaurants, movie theaters and hotels), while another 25 percent work in retail jobs at grocery stores, service stations and the like.

Profit margins at service-sector businesses like grocery stores and restaurants are generally 2 or 3 cents on every sales dollar. Sudden spikes in labor costs — such as a 40 percent jump in the minimum wage in two years — leave these businesses with two options: raise prices or reduce costs.

This might mean having waiters or waitresses bus their own tables or opting for a self-service alternative to young grocery baggers. In either case, that's one less job for a Pittsburgh teen to fill.

These losses can be devastating for a teenager's future. Teens start climbing the employment ladder through their first jobs, and they learn the “invisible curriculum” that comes from reporting to a supervisor or dealing with customers. There's a consequence for missing out: Research from economists at the University of North Carolina-Chapel Hill and Welch Consulting finds that there's lasting damage to earnings and employability.

Most mayors, whether they're in Pittsburgh or anywhere else, want nothing more than a bustling economy with safe streets and opportunities for all residents. Unfortunately, the minimum wage proposal supported by the president will put those opportunities only further out of reach.

Michael Saltsman is the research director at the Employment Policies Institute.

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