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Blame Minimum Wage for Youth Joblessness

Author: Amity Shlaes, Former Hayek Senior Fellow for Political Economy
June 27, 2011
Bloomberg.com

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Margins matter. That's what New Hampshire lawmakers were really saying to their governor, John Lynch, last week when they overrode his veto of legislation that limited increases in the minimum wage.

The law ties the New Hampshire minimum wage to the federal wage of $7.25 an hour. The effect is to guarantee New Hampshire employers an advantage of somewhere between $0.15 and $1.00 an hour over employers in other New England states, where minimum wages range from $7.40 an hour in Rhode Island to $8.25 an hour in Connecticut.

New Hampshire officials may be thinking of young job-seekers. Unemployment in the state for 16-19 year-olds averaged 18 percent in 2010. (Horrible enough, though well below national average of 25.9 percent, according to the Bureau of Labor Statistics.) And the minimum wage affects youths disproportionately: about half of those paid the federal minimum or less are under age 25.

Do penny differences really count when it comes to employment? The case that they do is stronger than it used to be -- especially when it comes to less productive workers like teens.

Particularly problematic for these teens is the federal minimum wage, an old fixture of the American workscape. In 1938, President Franklin D. Roosevelt signed the Fair Labor Standards Act, which placed direct upward pressure on wages. The act set the modern national minimum wage at $0.25 an hour, and established a maximum work week of 44 hours.

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