At the World Economic Forum in Davos, Ahmed Shihab-Eldin, host of Huffington Post's “HuffPost Live,” discussed global youth unemployment -- but never asked his guests about the real-world effect a minimum-wage increase would have on that rate.
Shihab-Eldin spoke with Coca-Cola Co. CEO Muhtar Kent and Entradas.com CEO Maria Fanjuly on Thursday, but despite real concerns that an increase in the minimum wage would have a negative impact on youth unemployment, the issue was never brought up.
Economists are torn on whether a minimum-wage increase would affect youth unemployment, and the Huffington Post has decided to side with those who think such an increase will have no impact on unemployment and only provide economic benefits.
Of course, beyond vaguely relevant and speculative charts, there is a need to discuss what effect a minimum-wage increase would really have on youth unemployment. An oft-cited 2009 report from the liberal think tank Economic Policy Institute found “no evidence” that the a 2007 federal minimum-wage increase ($6.55 to $7.25) lowered youth unemployment. To be fair, the report also didn't claim that the wage increase caused the youth unemployment rate to drop more slowly, either.
The report also found that “warnings of massive teen job loss due to minimum wage increases simply do not comport with the evidence.”
That evidence, however, does not appear as concrete as the EPI report makes it sound. EPI included a chart showing that larger labor market employment trends drive youth unemployment more than minimum-wage increases. But that chart doesn't show that minimum-wage increases helped youth unemployment in any way.
It’s also kind of disturbing that two of the three recessions between 1990 and 2007 occurred just after minimum-wage increases — but that’s most likely just a coincidence, as there are far more factors at play in determining recessions than one policy change.
The minimum wage was also increased in 1996, and had almost no effect on youth unemployment. And following the increase in 1997, youth employment rose.
One could also believe Huffington Post’s reporting of the economic benefits of minimum wage, but those benefits seem like more of a correlation than anything else. For example, HuffPo presented a chart showing job increases (however small) in states that increased the minimum wage. However, the chart doesn’t show how many jobs were created in states that didn’t increase the minimum wage and doesn’t note whether other factors played a role in the job increases. But weak correlations and unanswered questions make for good stories.
The source for the chart's statistics had not responded to an inquiry at the time of this posting
On the other side of the equation, the conservative think tank American Enterprise Institute found that the minimum-wage increases between 2007 and 2009 “can account for a 0.8 percentage point increase in the steady state unemployment rate and a 2.8 percentage point increase in unemployment for 15- to 24-year-old workers in the model parameterized to simulate outcomes of high school educated workers.”
AEI also found that found that “minimum wages play a major role in driving up unemployment rates for young French workers, and reducing or eliminating them could bring down youth unemployment rates in France close to U.S. levels.”
France was used as a model because of its higher minimum wage and high youth unemployment.
AEI is not alone in believing the minimum-wage increase played a role in the increase in youth unemployment during the 2007-2009 recession. Forbes contributor Tim Worstall pointed out in 2011 that higher minimum wages correlate with higher youth unemployment rates across Europe, except for Germany, which does not have a minimum wage.
Those against the minimum-wage increase insist that young workers take minimum-wage jobs to gain experience, and so the low pay is in line with that lack of experience. Therefore, a minimum-wage increase would show a job to be more deserving of pay or require more experience, meaning that older, more experienced workers would get the jobs over teens. As a result, raising the minimum wage would push young workers out of the market and defeat the purpose of minimum-wage jobs.
Regardless of what side one is on the minimum-wage debate, it’s a question that should have been asked of the business leaders at the forum.