• Tag Archives unemployment
  • The Minimum Wage Makes Teens Unemployable, So Taxpayers Are Paying $5.5 Billion to Find Them Jobs

    In February, the Obama administration proposed a “First Job” initiative. The main goal of the aptly titled initiative is to help unemployed young people obtain their first job by spending $5.5 billion on grants, training, and direct wages. Unfortunately – but unsurprisingly – the press release failed to acknowledge the most significant factor impeding employment in this age group: the minimum wage.

    Everyone knows that a first job is a vital step in a young person’s development. Research has shown that work experience at a young age teaches positive work habits, time management, perseverance, and improves self-confidence. Increases in teenage employment also reduce the rate of violent crime. Yet despite these well-known benefits, the US maintains a minimum wage policy that makes it very difficult for all but the most productive teenagers to find a job.

    When the minimum wage was discussed in the late 19th and early 20th century it was in the context of preventing the least skilled, most “undesirable” workers from finding a job, with the goal of eradicating the unemployable people. For the next 80-plus years it was common knowledge that a minimum wage would reduce employment among the least-skilled workers. The only debate was about whether such a reduction was desirable from society’s perspective, as many of the appalling eugenicists of the time contended.

    As late as 1987, the New York Times editorial staff recommended a minimum wage of $0 because of its negative effects on employment. The Times argued that the minimum wage was an ineffective anti-poverty tool whose employment costs outweighed any benefits from higher wages.

    Fast forward to the early 1990s, when an economic study purported to show that a slight increase in the minimum wage may not reduce employment after all. Despite the tenuous results of this study, it provided minimum wage supporters with the ammunition they needed to push for increases in the minimum wage at the federal, state, and local level without worrying about declines in employment. This misinformed thinking continues and is the basis for modern calls to raise the federal minimum wage to $10.10 per hour or even $15 per hour, as some cities have already done.

    Meanwhile, the labour force participation rate for 16-19 year olds has fallen from over 50% in the early 1990s to 35% in January 2016. Some of this is due to more young people engaging in extra-curricular activities and attending college, but if those were the only causes then the Obama administration would have little reason to be concerned about teenage employment.

    Despite the decline of teenagers in the labour market and the numerous recent studies that show that the minimum wage has adverse effects on teenage employment, the minimum wage continues to be viewed by many as an effective anti-poverty tool with little to no adverse effects. It is this line of thinking that has encouraged the newest proposal calling for billions of taxpayer dollars to provide jobs; the labor market, not the government, is the problem and so the government should intervene.

    An all too common occurrence in US policy is that government intervention causes a problem that the government then tries to solve with more intervention, completely ignoring the possibility that the initial intervention was the source of the problem. In this case, price controls at the bottom of the labor-market ladder have prevented young people from getting on the first rung, so now the government wants to roll over a $5.5 billion dollar taxpayer-funded stool to give them a boost.

    Government programs rarely achieve their goal so there is good reason to be skeptical of this one, especially since it fails to address the root cause of the problem. A better, more effective solution for helping teenagers gain valuable job skills would be to set the minimum wage at the proper level of $0 and let the labour market work.

     

    Source: The Minimum Wage Makes Teens Unemployable, So Taxpayers Are Paying $5.5 Billion to Find Them Jobs | Foundation for Economic Education


  • The Big Lie: 5.6% Unemployment

    Here’s something that many Americans — including some of the smartest and most educated among us — don’t know: The official unemployment rate, as reported by the U.S. Department of Labor, is extremely misleading.

    Right now, we’re hearing much celebrating from the media, the White House and Wall Street about how unemployment is “down” to 5.6%. The cheerleading for this number is deafening. The media loves a comeback story, the White House wants to score political points and Wall Street would like you to stay in the market.

    None of them will tell you this: If you, a family member or anyone is unemployed and has subsequently given up on finding a job — if you are so hopelessly out of work that you’ve stopped looking over the past four weeks — the Department of Labor doesn’t count you as unemployed. That’s right. While you are as unemployed as one can possibly be, and tragically may never find work again, you are not counted in the figure we see relentlessly in the news — currently 5.6%. Right now, as many as 30 million Americans are either out of work or severely underemployed. Trust me, the vast majority of them aren’t throwing parties to toast “falling” unemployment.

    There’s another reason why the official rate is misleading. Say you’re an out-of-work engineer or healthcare worker or construction worker or retail manager: If you perform a minimum of one hour of work in a week and are paid at least $20 — maybe someone pays you to mow their lawn — you’re not officially counted as unemployed in the much-reported 5.6%. Few Americans know this.

    Yet another figure of importance that doesn’t get much press: those working part time but wanting full-time work. If you have a degree in chemistry or math and are working 10 hours part time because it is all you can find — in other words, you are severely underemployed — the government doesn’t count you in the 5.6%. Few Americans know this.

    There’s no other way to say this. The official unemployment rate, which cruelly overlooks the suffering of the long-term and often permanently unemployed as well as the depressingly underemployed, amounts to a Big Lie.

    And it’s a lie that has consequences, because the great American dream is to have a good job, and in recent years, America has failed to deliver that dream more than it has at any time in recent memory. A good job is an individual’s primary identity, their very self-worth, their dignity — it establishes the relationship they have with their friends, community and country. When we fail to deliver a good job that fits a citizen’s talents, training and experience, we are failing the great American dream.

    Gallup defines a good job as 30+ hours per week for an organization that provides a regular paycheck. Right now, the U.S. is delivering at a staggeringly low rate of 44%, which is the number of full-time jobs as a percent of the adult population, 18 years and older. We need that to be 50% and a bare minimum of 10 million new, good jobs to replenish America’s middle class.

    Source: The Big Lie: 5.6% Unemployment


  • After Five Years Of Obamanomics, A Record 100 Million Americans Not Working

    The Bureau of Labor Statistics (BLS) jobs report for December counted 74,000 jobs created last month. That was less than half the 200,000 new jobs expected.

    Nevertheless, the BLS reported those 74,000 new jobs as reducing at least what it calls the U3 unemployment rate by three tenths of a percentage point, from 7.0% to 6.7%. That was because 347,000 workers fled the work force altogether last month, and so were no longer counted as unemployed.

    Those 347,000 workers leaving the workforce altogether were almost 5 times (4.689) the 74,000 new jobs created. But the BLS, and the New York Times, still count that as headline unemployment plummeting on net to 6.7% from 7.0%. In fact, all of the decline in the U3 headline unemployment rate since President Obama entered office has been due to workers leaving the work force, and therefore no longer counted as unemployed, rather than to new jobs created.
    Those 347,000 for December, 2013, however, are still out there not working, and suffering. Indeed, they joined a near record of more than 102 million Americans not working in December, all still out there and suffering without jobs. Those 102 million Americans are the human face of an employment-population ratio stuck at a pitiful 58.6%. In fact, more than 100 million Americans were not working in Obama’s workers’ paradise for all of 2013 and 2012.
    The 102.159 million Americans not working in December is not the all-time record of Americans not working. That all-time record was set in October, 2013, at 102.896 million. The employment-population ratio that month was an even more pitiful 58.2%.

    That was the lowest in 30 years, all the way back to 1983, the first year of the recovery from Reagan’s recession, which finally slayed the historic double digit inflation of the 1970s. The employment-population ratio of 57.9% in 1983 was up by the fifth year of Reagan’s recovery to 61.5%, on its way to 63.0% in 1989. That represented an increase of 17 million jobs since that recession started in July, 1981.

    But that was when America was following pro-growth economic policies. Today we have President Obama emphasizing equality rather than growth, and after 5 years of Obama as President, we still have not recovered all of the jobs lost since the recession began in 2007. When the recession began in December, 2007, the economy was employing 146.273 million Americans. Today, after 5 years of Obamanomics, in December, 2013 the number of Americans employed was still only 144.586 million, about 1.7 million fewer jobs.

    President Obama is not the only President to be challenged by a recession while in office. Since the Great Depression, there have been 10 other recessions before this last one. On average, all the jobs lost in those recessions were recovered within two years after the recession started, as reflected in the official historical data, which is well presented on the website of the Federal Reserve Bank of Minneapolis. But here we are today under President Obama, more than 6 years after the recession started, and we still have not recovered all of the lost jobs!

    Moreover, Obama apologists cannot say that Obama’s recovery from the recession is so bad because the recession was so bad. The historical record for the American economy has always been the worse the recession, the stronger the recovery. America has forgotten that experience, because Reaganomics produced 25 years of steady, often booming growth, from 1982 to 2007, with only two, short, shallow recessions. But under every other President in U.S. history, going back for well over a century at least, the economy was in a booming recovery within 5 years as President Obama has had, even under Franklin Roosevelt during the Great Depression!

    Today’s economic reality is better represented by what the BLS calls the U6 unemployment rate. That rate includes discouraged workers who have given up looking for a job in the past 4 weeks, and others the BLS considers marginally attached to the work force. It also includes involuntary part time workers who want a full time job but could only find part time work. That U6 unemployment rate was 13.1% in December.

    But the full reality is best understood by recognizing that over the past 8 years the U.S. working age population has increased by 19.3 million, but the number of jobs in America has grown by only 1.8 million during that time. That is what never recovering from the recession means in the real world.

    Source: After Five Years Of Obamanomics, A Record 100 Million Americans Not Working