Tuesday, June 7, 2011

Let's Reduce Teen Unemployment

Unemployment among teens is 24%.

Let's reduce teen unemployment. Here are a couple of thought experiments, and then a suggestion.

1. Pretend you are holding a garage sale this Saturday. You've got a lot of stuff to get rid of, and so you decide to make things simple on your neighbors, you will price each individual item at $10. At the end of the sale, you might have $20-$30, and a ton of your unsold stuff.

2. Pretend that all the gas stations in your state decide to sell gasoline at $10 per gallon. What will happen is that everybody is going to complain, some people will drive across the border to get to cheaper gas, some people won't drive at all, and a few desperate souls will endure the new expense. The gas stations, though, will find they aren't selling much gas anymore.

Price floors create surplus.

A minimum wage law is a price floor for workers. A minimum wage law is going to create surplus workers, that is, unemployment.

What if the minimum wage law were only to apply to workers over 21 years old? What if an employer were free to pay a teenaged worker a minimum of say 75% of minimum wage? (I'm suggesting a minimum, not a maximum wage.) What would happen to teen unemployment? My guess is teen unemployment would drop like a rock.

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