Consider One Other Factor in Unemployment Jump

By June 9, 2008Economy, General

What do these recent newspaper and wire service articles about the May unemployment figures have in common?

Answer? Not one of them mentions that the federal minimum wage rose from $5.15 an hour to $5.85 per hour as of July 24, 2007. It will climb again to $6.55 per hour effective July 24, 2008, and $7.25 per hour effective July 24, 2009. (From a Department of Labor factsheet.)

The increase in the minimum wage — last year’s and the mandated increase next month — is especially relevant to the May unemployment figures because the job market saw a heavy influx of younger workers during that period. From Philip L. Rone, Deputy Commissioner, Bureau of Labor Statistics: “Over the month, the number of persons in the labor force increased by 577,000, primarily among youth, and the labor force participation rate edged up to 66.2 percent.” (Our emphasis.)

In fact, the unemployment rate for teenagers rose from 15.4 percent in April to 18.7 percent in May. (From BLS summary.)

Since it’s the young workers entering the workforce for the first time who are most likely to earn the minimum wage, the higher minimum could certainly have discouraged employers from hiring them. Why wouldn’t the major media at least address the issue?

Fortunately, some others did:

Morrissey noted some strong comments from Jerry Bowyer, the chief economist of the BenchMark Financial Network, who accused the media of deliberately ignoring the cause. Bowyer said Congress can’t claim ignorance:

Free market economists warned them that this would increase unemployment – that rapid increases in unemployment compensation hit teens and minorities the hardest. But the class-warriors are running the people’s house now, and they would hear none of that, so they took to the floor, let loose the dogs of demagoguery, and saddled America’s pizza parlors, municipal swimming pools, house painting businesses and lawn mowing services with a huge cost increase.

And the class-warriors seem to have successfully escaped being held accountable for their jobs-destroying policies, at least from the major media. Which will only embolden them further. Next thing you know they’ll be imposing a windfall profits tax on energy producers.

UPDATE (12:30 p.m.): From Eastlick’s column: “According to economist David Neumark of the University of California at Irvine, for every 10 percent increase in the minimum wage, employment for high school dropouts and young black adults and teenagers falls by 8.5 percent. In the past 11 months alone, the United States’ minimum wage has increased by more than twice that amount.”



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