Mises Daily Articles
It's Labor Day, but there's nothing to celebrate.
On July 24 this year, the government raised the minimum wage to $7.25, which is another way of saying that unemployment is mandatory for anyone who is otherwise willing to work for less. You have no freedom to negotiate or lower the price for your service. You are either already valuable at this rate or you are out of the game.
Here is how it works. I've never been good at shaping pizza dough by hand, throwing it up in the air the way those guys do, so it would certainly cost more for any pizza joint to hire me at that high rate than I could bring them in revenue. I would be a sure money loser. As a result, the government has made it effectively illegal for me to attempt this kind of work.
This is done to help me, so they say.
This predicament is no longer isolated to a small sliver of the population that no one cares about, namely people who dabble in second careers (such as the pizza example) and the poorest of the poor. Now the problem is culture wide, so perhaps someone will start to get interested in its causes and consequences.
August data show that more than a quarter of teenagers looking for work cannot find employment at the existing wage floor. Many have just stopped trying. The teen unemployment rate is nearly three times the national rate and it is four times the rate of skilled and experienced workers over the age of 55.
This is the highest rate ever recorded in the United States. The data have only been kept since 1948, but we can be quite sure that never in US history have so many teens been so alienated from gainful employment and work experience.
These are the years in which young people learn valuable skills and ethics that they will carry with them until they die. At work, they meet a great variety of people and have to learn to deal cooperatively with different temperaments and personalities. They learn how to do things they do not really want to do and they also discover the relationship between work and reward. They gain their first experience with independent use of money — acquiring and spending — and how to calibrate the relationship between the two.
These are skills people draw on forever. They are far more important to their future than is the main activity taking up their time: sitting at school desks.
This portends terrible things for the future of the American workforce. People dumped on the labor market after college will be even more worthless than they are already.
And when I read that the "stimulus package" includes funding for job training for teens as a way of addressing this problem, I couldn't stop laughing: government-funded job training has a long record of being a full-employment program for tax-funded job trainers but otherwise amounting to a big nothing.
Interestingly, there is a corresponding trend affecting those who are getting their first jobs out of college. It turns out that half of college graduates under the age of 25 are working in jobs that require no college education at all. Think of Starbucks, the Gap, Target, and the like. Not that there is anything wrong with these jobs. But here's the thing: these positions used to be held by young people before they finished college (which is in turn devoting itself to remedial education on the basics).
Do you see what is happening here? The minimum wage, subsidized college loans, child work laws, and other interventions are conspiring to prolong adolescence as long as possible — to the point that these young adults are seeing as much as a full decade of life experience pretty well stolen from them.
And there are no signs that this will change once the recession ends; after the last recession, youth unemployment never recovered its losses.
Why are we not seeing the Million Teen March on Washington? Not everyone understands what is happening or why. I doubt that 1 in 100 teens would consider that the minimum wage is what is keeping them unemployed. And the college grads themselves are pretty well befuddled as to why the great promise of future riches if they "stay in school" is not panning out. Rather than be angry at government, most of these kids are merely cynical and dependent on periodic parental bailouts.
College students themselves lack work experience so they don't have a realistic understanding of what the work world requires of them. They major in "management" and imagine that, with this fabulous degree, they will possess the right to earn big bucks by bossing people around. A degree in "communications" will get them on Fox News. An "urban planning" degree will provide the opportunity — nay, the right — to build cities and highway systems.
Then the day of graduation comes and reality hits hard. There is no one who wants what they know, and, in fact, they know very little that makes them useful. Their resumes are barren, without a single professional reference or anything that is connected to the real world. All they really know is how to vegetate in class and socialize with peers on nights and weekends.
For example, I've been personally shocked at the lack of basic software skills that college grads have. There is hardly any professional position anywhere that doesn't require some facility with software and technology. Is this not common knowledge? I guess not: people are continuing to graduate today with no more technical skills than it takes to manage a Facebook page.
As for work ethics and the ability to add value to an enterprise (versus merely serving their own interests), forget it: generation sloth knows nothing about this.
It's probably not their fault.
Aside from the economic costs, the biggest cost is to the human character. It encourages the worst possible value system during the critical years in which character is shaped. Our country is caging people up for a quarter of their lives in government holding tanks and then dumping them on a cold, cruel world for which they are not prepared.
It's true that this trend began back in the 1930s, when FDR decided that he could help the unemployment problem by making it illegal for young teens to work (unless, of course, they are child actors like Shirley Temple). That's like losing weight by rigging the scale to lie to you. Ever since, federal law has tightened and tightened to the point that nearly the entire teenage population is being barred from the division of labor and otherwise told nothing about what it requires to be part of it down the line.
I end on an optimistic note and not merely because it is customary. The digital age is providing ever more opportunities for people to make their own way in this world, outside the old definition of formalized work. The government closes doors. The market, incredibly and fortuitously, keeps opening them.