Unemployment went up in May. Why?
Well, note the two sectors where unemployment went up the most: teens and African-Americans.
Teenagers, as schools let out for summer, tend to change jobs and seek new ones, en masse. But that’s seasonal, and the figures for unemployment rates already adjust for that.
So why did teen unemployment increase by 3.3 percent, and for blacks unemployment go up 1.1 percent?
Steve Horwitz, a St Lawrence University economist, points out that last summer politicians in Washington pounded their chests about how good they were and raised the national minimum wage. Trouble is, minimum wage laws don’t increase skills. Or productivity. All they do is prohibit employers from paying below a certain rate, currently $5.85 an hour. In late July that shoots higher.
So employers become pickier. Increase the amount they must pay and they will naturally try to find every way they can to increase the productivity of those employees affected by the new minimum.
They tend to fire (or not hire) inexperienced workers, like teenagers, and those who have invested the least in their own skillset — historically, in America, that amounts to a statistically large percentage of African Americans.
“With a sluggish economy,” Horwitz writes, “it certainly seems possible that the higher minimum wage is discouraging employers from hiring lower-skill workers …â€
Which suggests our politicians are also, if not low-skilled, low-wisdomed.
This is Common Sense. I’m Paul Jacob.