Editorials

An outlook of gloom prevailed in most reports on the latest Bureau of Labor Statistics��? announcement that 51,000 more jobs were cut and the unemployment rate climbed to a four-year high of 5.7 percent in July.

This is the seventh straight month of a contracting labor market, and the unemployment rate has climbed a full percentage point since July 2007, facts that clearly are of concern.

But a closer look at the Aug. 1 report offers a glimmer of hope. There was good news in that job revisions to May and June were up 26,000. That means in this report the total payroll employment in the economy is virtually flat, said analysts Rea Hederman and James Sherk of the Heritage Foundation.

Job losses for July also were lower than the average monthly job loss for 2008, indicating that the pace of job losses might be slowing, the analysts noted.

A factor in the month��?s job losses, they said, was due to the minimum wage increase that has cost many teenage workers their jobs.

Congress cannot repeal the law of supply and demand, and it is unlikely teenage unemployment will fall significantly when the economy picks up, Hederman and Sherk noted. Thus, Congress has priced many teenage workers out of the labor market.

â�?�?Subsequently, many teens will not get the chance to develop job skills that will make them more productive workers and enable them to earn raises in the future,â�? the analysts emphasized. â�?�?Studies show that â�?�? due to this lost job experience â�?�? higher minimum wages adversely impact teenagersâ�?�? earnings up to a decade after the increase takes effect.â�?

Figures for July show the impact was heavy on teen workers. Teen unemployment rose 2.2 percentage points, continuing a recent trend. Unemployment has risen much more rapidly for teenagers than any other demographic group.

Since January 2007, teenage unemployment has climbed 5.3 percent, while the unemployment for workers at least 20 years old has risen only 0.9 percent.

Hederman and Sherk explain why minimum wage increases have taken the bigger toll among teen workers.

Minimum wage jobs are entry- level positions for workers with little experience in the labor market. Many of these are teenagers. Most minimum wage workers are between ages 16 and 24.

Relatively, minimum wage workers are secondary earners in their families ��? the average family income of a minimum wage worker is more than $50,000 a year. As they gain experience, such workers become more productive and earn a raise. Two-thirds of minimum wage workers earn a raise within a year.

Raising the minimum wage makes it more expensive to hire these unskilled workers, it is stressed. Employers will not pay a worker more than the value they add to the company; they will never pay $6.55 an hour to an employee whose skills add only $6 an hour to its revenues, Hederman and Sherk said.

Studies show that each 10 percent increase in the minimum wage reduces employment of affected workers, such as teenagers, by approximately 2 percent. The minimum wage has been increased by 19 percent since January 2007, after adjusting for inflation.

Job losses are relatively light and contained in a few sectors of the economy or to teenagers. Even though job losses are always painful, the labor market has not declined to the extent that would be expected if the economy really were in a recession, the Heritage experts conclude.

Congress can make a difference and prevent future losses of entry level jobs by just declining to implement the next increase in the minimum wage.