Minimum Wage

Maine’s higher minimum wage is doing tangible harm to young workers

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Lawmakers in Augusta have proposed a spate of bills this session in an attempt to mitigate the negative effects of Maine’s 2016 minimum wage hike, which will bring our wage floor to $12 per hour next year.

One of the bills under consideration, LD 612, would establish a lower minimum wage for teenagers ($1 lower than the general minimum wage for 16 and 17-year-olds, $2 lower for 15-year-olds, and $3 lower for 14-year-olds). So in 2020, when Maine’s $12 minimum wage is fully phased-in, an employer would have to pay a 14-year-old no less than $9 per hour (not too shabby, considering the general minimum wage was $7.50 in 2016). The reasoning behind the bill is simple: Many teenagers lack the competence and work ethic of adult workers, and employers may not be willing to hire young people at all under the full minimum wage. Would you hire a 15-year-old kid for $12 an hour?

The Maine Center for Economic Policy (MECEP) had this to say about the proposal:

“A reduced minimum wage for young workers would be unprecedented. Many teenagers work to help support their families, and they can no more control how old they are than their gender or race. MECEP estimates that one in five working Mainers under the age of 18 lives in or near poverty. For working Mainers under the age of 20, that proportion rises to one in four. Cutting the minimum wage for these young people will have serious impacts on their families’ wellbeing.”

With regard to a reduced minimum wage for young workers being unprecedented, MECEP doesn’t seem to have looked very hard. Since 1996, federal law has allowed employers to pay workers under the age of 20 a youth minimum wage of $4.25 an hour during the first 90 calendar days of their employment. In addition, many other developed countries — including Belgium, Australia, Ireland, Portugal, the Netherlands, and the U.K. — have adopted youth minimum wages.

A study in the IZA Journal of Labor Policy found that “both the relative employment and labor force participation rates of individuals below the age of 25 are about 10 and 12 percentage points higher, respectively, in countries with youth minimum wages, as compared to countries with uniform minimum wages.” In other words, youth minimum wages dramatically improve young people’s ability to find jobs.

Next, MECEP argues that a lower minimum wage for teenagers would reduce the incomes of families already struggling in or near poverty. What it fails to acknowledge is a high minimum wage threatens to eliminate job opportunities for these very same young people.

MECEP touches on the topic of job losses only to insist they’re not happening. “All the evidence points to the same conclusion: There have been no widespread negative impacts [of the higher minimum wage]. Employment is up, unemployment rates remain at record lows.”

Really? Did the unemployment rate among young workers (16 to 24-year-olds) hold steady or even decline in the aftermath of Maine’s minimum wage increase, as MECEP suggests?

Not even close.

In fact, in 2017 and 2018, even as the overall unemployment rate in Maine declined and stabilized, the unemployment rate among young workers (again, 16 to 24-year-olds) grew steadily — from 9 percent in 2016 to 11.4 percent last year. Not only that, but the minimum wage increase coincides with an abrupt reversal of the trend in unemployment among young workers, which had been falling in line with the overall unemployment rate (see graph). According to official government statistics, 3,000 more young people were unable to find work in 2018 than in 2016, despite generally improving economic conditions.

Thousands of young people in Maine are already feeling the harmful effects of a higher minimum wage — and it will only get worse as it rises to $12 next year. Based on pioneering work by two economists from MIT and the National Bureau of Economic Research, the American Action Forum estimates that by 2023 Maine will have 28,000 fewer jobs — mostly among young people — than if the minimum wage had stayed at its previous level.

When MECEP claims that the minimum wage hike hasn’t done any harm, it’s willfully ignoring the evidence. A youth minimum wage can’t repair the damage already done, but it can expand opportunities for thousands of teenagers in the future.

About Liam Sigaud

Liam Sigaud is a former policy analyst at The Maine Heritage Policy Center. A native of Rockland, Maine, he holds a B.A. in Biology from the University of Maine at Augusta and has studied policy analysis and economics at the Muskie School of Public Service at the University of Southern Maine. He can be reached by email at liam.sigaud@maine.edu.

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