In debate over wages, a youth minimum is reform to consider

Aone-size-fits-all approach to the minimum wage is bad policy. Then again, we join other conservatives and libertarians in opposing the very concept of a mandated wage. However, given that the minimum wage is the law of the land and likely to remain so, the next-best option is reform — specifically as the law applies to younger, entry-level workers.

Liberals continually press for an increase in the federal minimum wage, rather than leaving the decision to local and state jurisdictions. Some of those jurisdictions mandate a base wage much higher than the current federal base of $7.25 an hour.

Federal law allows an exception for the youngest workers. It’s called the youth minimum wage (YMW) and permits employers to pay workers under the age of 20 at the lower rate of $4.25 an hour, but only for the first 90 days.

States aren’t bound by this: They can mandate that all workers, regardless of age and experience, be paid a rate no lower than, say, $12 an hour. This goes against basic economic principles. The result is higher unemployment among youths.

Manhattan Institute policy analyst Preston Cooper calls this the “disemployment effect.” Employers bound by a $12-an-hour minimum wage have no incentive to hire younger, less-experienced workers. Even if they take advantage of the YMW exception, the wage would increase dramatically after three months.

Cooper cites a 2013 paper by economists Jonathan Meer and Jeremy West, who said a minimum wage hike reduces employment growth for teenagers three times more than it does for workers in their early 20s, and 11 times more than it does for middle-aged workers.

“This is not surprising,” Cooper wrote this month. “All other things being equal, businesses are less likely to offer jobs to young, unskilled workers if they must pay them the same as older, more experienced (and presumably more productive) workers.”

A sensible reform is to establish a graduated minimum wage that sanctions lower wages for younger workers for a reasonable time. The YMW has been around for nearly 10 years but it’s also one-size-fits-all.

In a locale with a mandated minimum wage of $15 an hour (a rate that’s already in process in Seattle), a youth hired under the YMW exception would get a greater than 100 percent raise after three months on the job. Again, employers aren’t likely to take the bait. Instead, they’ll seek older, more experienced workers from the beginning.

A graduated system would let a youth be hired at the YMW base rate for 90 days, followed by a period in which the base rate rises incrementally as the worker gains skills and experience. A disincentive to hire the young would be turned into an incentive.

There is precedent for this approach. In some states, including Oklahoma, younger drivers go through a graduated licensure process. Before gaining the full privilege status of adults, new drivers go through stages that limit their privileges. In effect, they must train on the job and be subject to certain restrictions.

Youth employment could include a learner stage, intermediate stage and full privilege stage. The opposite is a system in which the learner and intermediate stages are bypassed; the employer must pay the young, inexperienced worker the exact same as he would a worker who’s 28 and been employed for 10 years.

Want to reduce chronic unemployment among the young? Let employers pay them, at least temporarily, at a rate commensurate with their skills and experience.