Young and Unemployed

Young and Unemployed December 10, 2008

The New York Times had an editorial Monday arguing that Barack Obama ought to give attention in crafting his stimulus/public works program to the plight of teen workers. As the Times puts it:

Young people who fail to find early jobs are more likely to remain underemployed or unemployed into their 20s and beyond. The risks are compounded for low-income youth, who are more likely to leave school and have other problems when they do not find work.

According to a recent analysis by Andrew Sum, an economist at Northeastern University, the percentage of teens employed has fallen from nearly 45 percent in 2000 to about 30 percent today. That is almost 10 times the decrease for adult workers, who are increasingly taking jobs that once went to teenagers.

The situation is far worse in low-income minority areas, where the youth employment rate appears to be hovering not much above 10 percent. That will only get worse as the economy contracts. And even when the recession ends, it could take an additional two or three years before youth employment begins to recover.

More. Of course, one policy that likely contributes to teenage unemployment is the minimum wage. Here, for example, is a study David Neumark and Olena Nizalova on the long term effects of the minimum wage on the wages of those exposed to minimum wage laws as teenagers. According to the study:

The evidence indicates that even as individuals reach their late 20’s, they work less and earn less the longer they were exposed to a higher minimum wage, especially as a teenager. The adverse longer-run effects of facing high minimum wages as a teenager are stronger for blacks.

This would tend to corroborate the Times’ claim that employment helps teens “learn[] basic workplace skills and develop[] work histories that made them attractive to future employers,” and thus has benefits that go far beyond what’s included in a paycheck.

While we’re on the subject, here is another study, by David Nuemark and William Wascher, examining the different effects that the minimum wage and EITC have on employment for men and women. From the abstract:

For the minimum wage, the evidence points to disemployment effects that are concentrated among young minority men. For young women, there is little evidence that minimum wages reduce employment, with the exception of high school dropouts. In contrast, evidence strongly suggests that the EITC boosts employment of young women (although not teenagers). We also explore how minimum wages and the EITC interact, and the evidence reveals policy effects that vary substantially across different groups. For example, higher minimum wages appear to reduce earnings of minority men, and more so when the EITC is high. In contrast, our results indicate that the EITC boosts employment and earnings for minority women, and coupling the EITC with a higher minimum wage appears to enhance this positive effect.

In case you were wondering, here is the unemployment rate broken down by sex:

The last minimum wage increase was in July of 2008. It’s due to rise again next year. If Obama wishes to reduce unemployment, and particularly unemployment among the young and among minority groups, he might consider putting off this increase at least until troubled times are over (I would suggest abolishing the minimum wage altogether, but one must try to be realistic).

(HT: Coyote Blog)

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  • jonathanjones02

    Another way to help the young and unemployed is to stop the wage destruction that comes with a large influx and steady stream of low skill labor willing to work for cheap (and not particularly willing to report abuses, which keeps big business happy). In other words, the last great labor leader in the U.S., Cesar Chavez, was exactly right ::

    Mark Krikorian writes in more detail about the more than a million and a half number decline in the number of 16 – 34 employed native-born between 2000 and 2005 here:
    http://corner.nationalreview.com/post/?q=ZjQwODYwNWM1ZjA2ZDQ0YzIyMWFjYTgxZmM5ZjY4MWE=

  • A high EITC decreases minority male employment, but increases female employment? What is the mechanism responsible for that?

  • Enough with the immigration nonsense again. For a start, please do not quote the National Review on economics. Bad as they are on other topics, they are utterly atrocious on economics. See here for the problems with that linked paper: http://www.urban.org/publications/900808.html.

    More fundamentally, those who try to find serious effects of immigration on low-income native born workers tend to come up short– they find very small effects or none at all (see here: http://www.nytimes.com/2006/04/16/business/yourmoney/16view.html?ei=5088&en=2314f86f5f3affb4&ex=1302840000&partner=rssnyt&emc=rss&pagewanted=print)

    As I’ve noted many time, wages of the poor and middle class have been stagnant in real terms since the early 1970s, and actually falling among core demographics (such as prime-age men). There are many explanations for this, and there is no consensus, but nobody really believes immigration is a major factor. The leading candidate is probably the decline in unionization and the associated bargaining power of workers.

    On a more fundamental point, I do not see why the welfare of an unskilled worker in the US should count for more than an unskilled worker in Mexico, especially when divided by an arbitrary border.

  • RR

    ^ The poor in Mexico don’t count. They’re Mexican. America first!

  • jonathanjones02

    Krikorian, Borjas, Sailer, and others do important work on immigration, economy, and other topics, and I will continue to discuss it as I see fit – hopefully with substantive engagement from anyone who disagrees, instead of condensation and name-calling.

    There is an impact on low-income native born workers, the question is one of size. Borjas writes about that here:
    http://ksghome.harvard.edu/~GBorjas/Papers/HANDBOOK.pdf

    And there are plenty of examples of this in action, most notably over the past few years in factories and processing centers throughout the South and Midwest…..abuse of workers, lost jobs for those who have been in the community for decades/generations, stolen identities, and a whole host of other problems rooted in our open borders sentimentality:
    http://savvyconsumer.wordpress.com/2008/10/23/immigration-raid-reveals-dirty-secret-in-meat-processing-pants/
    http://www.iht.com/articles/ap/2008/05/12/america/NA-GEN-US-Immigration-Raid.php
    ECT.

    As to the more “fundamental point,” political order must be built on an underlying reality such as kinship, religion, locality. You care about the common good? Then an influx of low-skill labor from another region is an extremely poor way to go about it. Common ancestry, a common homeland and a shared history are not arbitrary. A stable, free and democratic form of government is based on shared interests. Humans need some concrete link to each other in order to come together and built communities. A stable basis for a humane society is commonality – including place – much more than sentiment about universal human rights and can’t we all get along and who cares about borders and let’s all be friends. Doesn’t work that way, unless you know a way to change human nature.

  • First, George Borjas is a real economist with good credentials– do not associate him with the likes of Krikorian, and especially not racists like Sailor. It is most assuredly not condescension (or condensation as you put it) to distinguish between real experts and phonies.

    Second, we’ve been through this before Borjas’s original metholodology was flawed, and his estimate was reduced from about 8 percent to 4 percent (effect of immigration on the wages of low-skilled). Larry Katz argues that it’s even lower.

    Third, I’m all in favor of subsidiarity and community, which is precisely why I have scant respect for the arbitary borders of modern nation states. Look at the Rio Grande border- it divides what should be a natural community.

  • M.Z. Forrest

    The increase in male unemployment would seem to better correspond with the collapse of construction.

    As to the more general point, the level of the minimum wage would facially appear to be the least significant factor in the transition between living at home and self-sufficiency. Obviously, the various authors are attempting to empirically show the opposite to be the case. I tend to discount these things because the results are not repeated at later ages.

  • jonathanjones02

    MM:
    Racist! Of course. Well, Borjas and Sailer overlap quite a bit in their opinions of this, but no matter. How odd that the law of supply and demand should not apply to immigration (when economists write about America’s immigration polices at all, which is rare.)

    In the recent amnesty debate, Borjas stated that the bill was to be opposed because it leads to distorted incentives: likely encourage more illegal immigration, the guest worker program will increase profits for employers, but at the cost of a two-tier labor market with an easily exploitable workforce and lower wages for native workers, and that the guest workers themselves have a huge economic incentive to become permanent settlers, even if doing so means becoming illegal immigrants.

    He was and is right. See here:
    http://borjas.typepad.com/the_borjas_blog/2007/06/are_opponents_o.html

    American economic policy should be for the benefit of Americans and its descendents, not full of sentimentalism of the very many potential immigrants, many of whom live in countries with very low GDP and very big social problems. Again, anyone who cares about the common good should take this into account, and such a sentiment is not against Catholic teaching in the slightest, nor is it anti-humanatarian.

    Our jobs may not be threatened by a large influx of low-skilled labor from one place over a short period of time, but there are those who are. We have an obligation to them, and to those caught in the bloodbath of many border towns (how familiar are you with the aforementioned Rio Grande border? I was born and grew up an hour away…), to those affected by the crisis of public services and school problems, by those affected by the increase of a lack of health care coverage and on costs (are you aware that in Texas alone, the comptroller’s office estimates – on the low end – that illegal immigration costs hospitals 2 billion a year?)

    Let us end the romanticism of mass, illegal immigration. And look at Catechism 2241

    The more prosperous nations are obliged, to the extent they are able, to welcome the foreigner in search of the security and the means of livelihood which he cannot find in his country of origin. Public authorities should see to it that the natural right is respected that places a guest under the protection of those who receive him.

    Political authorities, for the sake of the common good for which they are responsible, may make the exercise of the right to immigrate subject to various juridical conditions, especially with regard to the immigrants’ duties toward their country of adoption. Immigrants are obliged to respect with gratitude the material and spiritual heritage of the country that receives them, to obey its laws and to assist in carrying civic burdens.

    Oh, and thanks for staying on top of my spelling. I tend to type very quickly when writing blog comments.

  • American economic policy should be for the benefit of Americans and its descendents.

    The problem with this formulation is that if a person is allowed to immigrate, then they can become an American, and thus become a part of the moral calculus. If the idea is that American economic policy should be for the benefit of those who are Americans as of December 10, 2008, and their descendants, then this would seem arbitrary. And in any event, even Borjas admits that the benefits to native workers from immigration overall outweigh the losses to certain groups. So even if we were to accept the arbitrarily limited definition of who counts when setting economic policy, this wouldn’t justify what you’re saying.

  • jonathanjones02

    Blackadder,

    I have no problem with immigration, and people becoming a part of our fabric. The question, however, is who? whom? (Lenin was right about that.) We need to debate which skills are needed, how current populations will be impacted, ect. and then proceed, following our laws, or changing the laws as necessary democratically. Sadly, any suggestion that a large influx of low skill Mexicans / Central Americans over a short period of time might not be a good idea somehow tends to get branded as Racist!

    I say: what is the impact on health care? On the schools? On various public services? On the crime rates? On gang activity? How do the second and third generations do? What is the assimilation? What is the impact upon the communities and various labor markets (black Americans, for example, are now largely out of the construction industry they once dominated).

    And in any event, even Borjas admits that the benefits to native workers from immigration overall outweigh the losses to certain groups.

    Citation? Two and a half years ago (here: http://www.nationalreview.com/script/printpage.p?ref=/issue/borgas200604250622.asp) he wrote the opposite, and his public writings and blog stands by the sentiment (although he doesn’t post as much as I’d like….but if he has retracted, I’d like to know where).

  • Zak

    I’m generally in favor of immigration, and I think there must be ways of mitigating the effects of low wage immigrants, but MM, I don’t see how the immigration of lots of unskilled workers could NOT drive down wages at the low end of the scale. With millions of fewer employees, wouldn’t employers have to raise wages? Or is the idea that more work would be sent to other countries if wage levels were higher (although that’s not possible with much of the service work that typically has lower wages)?

  • Jonathan,

    Borjas thinks that immigration has had a slight (between 4% and 8%) negative impact on the wages of high school dropouts. This negative effect, however, is more than counter-balanced by the positive impact on the wages of those who have completed high school. So, for example, in his article on Immigration for the Concise Encyclopedia of Economics, Borjas says:

    Although the entry of immigrants reduces the wages of comparable natives, it increases slightly the income of U.S. natives overall.

    And note, Borjas is a pessimist on the subject. Other studies have found the negative effect on the wages of even low wage workers to be much smaller and the overall positive effect to be much larger. But even if one goes with his numbers the overall positive impact of immigration is around $22 billion a year.

  • Zak

    Jonathan, large scale immigration of low wage workers from Latin America is unlikely to diminish significantly (outside of the current recession). Assuming it continues, and the millions of illegal immigrants don’t go back to Mexico and Central America, how would you suggest the problems you mention (and about which I too am concerned) be addressed?

    Relating to crime more generally, though, aren’t crime levels by immigrants and second generation Americans not much different from the population as a whole.

    I also think that although integration is clearly a good thing, Americans should also recognize that the integration of immigrants often enriches our national culture by absorbing some of the positive aspects of their culture. As everyone here on VN believes, American culture is not unambiguously good (to say the least), even if different people tend to emphasize different flaws. So what sort of response to immigration should their be that helps immigrants absorb the positive aspects of American culture? Although I’m not sure we’d all agree what those are.

  • jonathanjones02

    Blackadder,

    Great – let’s assume the overall effect is positive (although that would be of small comfort to those across the South, West, and Midwest in recent years who witnessed very firsthand the negative impact). There are still social costs well into the generations we need to be able to more rationally and openly discuss.

    Zak,

    I would take seriously stopping the crossings (which anyone familiar with the border should recognize will decrease violence – many border areas are literally war zones, and might also better stop the brutal human trafficking), encourage those here illegally to leave (including financial incentives), reform the system (to include, for example, preference by skill and need), and implement employment verification.

    On the culture question, no culture composed of sinful humanity will be “unambiguously good.” Culture, in my opinion, is a normative order by which humans comprehend themselves, others, and the larger world and through which they order experience. I’ll write more (I think) on this point, but the common good must recognize that commonality is vital. A large, illegal influx from (mostly) one place over a short period of time of (mostly) low skill workers who consume large amounts of public services is not conducive to the common good, and we need to get over our status-climbing efforts over those like ourselves when such a sentiment can be labeled as Racist!, be it over the Internet (not necessarily on this thread), and something certainly evident by the lack of public debate on this. To hold together a multiethnic or multilingual state, either an authoritarian regime or a dominant ethnocultural core is essential…..this has been demonstrated time and time across time and environment, and we must recognize and respect this. It doesn’t mean we have to like it – I’m a can’t we all get along kind of guy. Watch California over the next decade and I expect you’ll get a very good sense……L.A. is at the beginning of a very ugly, very violent ethnic conflict.

    Assimilation is vital, and this requires time and small-ish numbers. Do you know why the military has, by far, the best race and gender and in general relations of any segment of society? Assimilation to a more common mindset and goal….and the barriers to entry are also similar. This goes a long way toward harmony and decreasing resentment.

  • Jonathan,

    As someone who grew up in the Southwest and now lives in the Midwest, I don’t find your repeated allusions to the negative impact of immigration on these areas all that compelling, to put it mildly.

  • jonathanjones02

    Blackadder,

    I hope you are right. We’ll see soon enough. And California is once again an innovative leader.

  • RR

    “Sadly, any suggestion that a large influx of low skill Mexicans / Central Americans over a short period of time might not be a good idea somehow tends to get branded as Racist!”

    And any suggestion that an even larger influx of low skill Irish over a short period of time might not be a good idea somehow tends to get branded as anti-Catholic. We should’ve kept those papists out like we did the Chinese. It’s time we resurrect the Workingman’s Party. Otherwise, the entire nation will turn into New York City and we wouldn’t want that.

  • Zak

    Beyond stopping people from crossing the border (and most accounts I’ve read from people who, like you, are from the border area, question the feasibility of such a proposal), what do you recommend?

    I’m sorry, but your comments seem to reveal a lack of reflection about past waves of immigration. How does this wave differ from previous ones? Is it because a large majority of the immigrants are from one place (Mexico), speaking one language (Spanish)? Why is the determinative? This wave, like past waves, is mostly of people with low education levels, earning low wages. The immigrants, as in past waves, are mostly of a religion (Catholicism) not shared by most Americans and implying a very different culture from those of any one of the founding cultures of the US (puritan, Anglican, or back-country presbyterian). Second generation immigrants seem, as in the past, to learn English very pretty well. Immigrants settle in communities where they become the dominant group, just as in the past.

    The major problem of Catholic immigration, I would argue, is that Catholics assimilated the dominant American values too well, rather than retaining that which would have been a suitable counterweight to the consumerism and individualism which undermine US community, just as Putnam has found diversity to do.

    I don’t think you can argue for an ethnocultural core to which immigrants should be assimiliated until you’ve defined that core and demonstrated its benefit. The reason I find Sam Huntington’s anti-immigration argument so weak is that I don’t find his notion of what makes American culture so great convincing. As a Catholic, what do you see as the strengths and weaknesses of our current “core culture?”

  • Bill H

    The consensus among most labor economists is that the prime culprit for wage stagnation among lower and lower-middle class workers is skill-based technological change. Greater automation in general, and the development of the personal computer in particular, has made a pretty significant dent in the demand for low-skill labor.

  • S.B.

    Here, for example, is a study David Neumark and Olena Nizalova on the long term effects of the minimum wage on the wages of those exposed to minimum wage laws as teenagers

    I think Richard Vedder has studied that same question as well.

  • “Racist! Of course. Well, Borjas and Sailer overlap quite a bit in their opinions of this, but no matter.”

    George Borjas is a Harvard economist; Sailor is a race-baiter who writes for the white nativist “V-dare” (regarded as a hate group by the Southern Poverty Law Center) and refers to Obama as the “half-blood prince”. Sorry if I refuse to equivocate here.

    American economic policy should be for the benefit of Americans and its descendents, not full of sentimentalism..

    Again, you have a very liberal obsession with the legitimacy of the nation state. The US-Mexico border is in some parts as arbitrary as the lines on the map of Africa drawn up late-nineteenth century European colonialists. You keep talking about the importance of community. Arbitary lines on a map sunders community, often in an unjust manner. In the recent US context, the most egregious violation of justice came with the ICE stormtroopers forcefully splitting up families through forced deportation.

    Back to the economics. Blackadder is correct to note that Borjas and Katz come up with the most ambitious effect of immigration on the wages of low-skilled native Americans (defined as high-school dropouts). The initial number was 8 percent, but this was revised down to 3.6 percent when some of the methodology was challenged. However, the best source in this debate is probably David Card, John Bate sClark medal winner– he finds no significant effect at all on low-skilled wages whatsoever. Of course, it is also correct to note that the effect on aggregate wages is actually positive.

    Your concern with the wages of lower skilled workers is admirable. The stagnation of real wages over three decades and the concomitant rise in income inequality is a huge problem, especially since those who suffered worst are prime-age males, those charged in times past with earning a family wage. I think we can all agree that immigration is an insignificant determinant of these trends. The two leading candidates as skill-biased technical change and the decline in unionization, and the evidence points toward the latter. So if you care so much about native American workers, you would be endorsing pro-union legislation.

  • Some previous posts on this:

    Immigration and wages: http://www.patheos.com/blogs/voxnova/2007/06/18/economics-and-immigration/

    Bottom line: there is a “surprisingly weak relationship between immigration and less-skilled wages.” (David Card)

    Wage stagnation and the theories behind it: http://www.patheos.com/blogs/voxnova/2007/12/06/laissez-faire-restored-workers-left-behind/#more-1483

    Bottom line: social norms changed in the 1970s, moving toward more laissez-faire economics and the drastic reduction in unionization and union power.

  • radicalcatholicmom

    Jonathan,
    My neighbors on my left are Filipinos, on my right are Korean. Across the street, white, Korean, black. The rest of the cul-de-sac is a mix. My own household is mixed. I see our diversity in our neighborhood as a good thing. It is not even an issue. And our children all play together.

  • c matt

    I don’t have a problem with unions per se, but it seems modern unions have become a part of the problem – just another bureaucratic mess that needs to be fed on dues (aka employment taxes).

  • c matt

    Houston is about as diverse a place you will find, and it does not seem to suffer from many of the ills we hear of from L.A.

    But diversity just for diversity’s sake seems rather pointless. What’s the real difference between a green and a red M&M if they taste the same? Too often racial diversity is mistaken for intellectual diversity, which is far more significant in my view.

  • jonathanjones02

    I’m waaaay behind on draft chapters (as in very far) and need to stop goofing around on the Internet, so here is my last comment: look at as many people as possible who would disagree with you about populations and individual/group differences, and then social impact – Vdare, Derbyshire, Hitchens, Sailer, the War Nerd, Rushton, James Watson, Kevin MacDonald, SecularRight.org, ect. These issues aren’t going away, there are many excellent “points” on the “other side” that should be engaged, and let’s shy away from throwing around heated terms and address points directly as much as possible when discussing things like this. These issues will dominate our next decades – the large migrations that started in the early 60s show no sign of slowing, and many will feel the impact both personally and in social costs.

  • blackadderiv

    The stagnation of real wages over three decades and the concomitant rise in income inequality is a huge problem… The two leading candidates as skill-biased technical change and the decline in unionization, and the evidence points toward the latter.

    I don’t think this is accurate. Technology and education are certainly possibilities, as is the rising cost of health care and changes in household structure. Trade may also be a factor. The decline in unionization, by contrast, has at most had a modest effect.

  • blackadderiv

    Again, you have a very liberal obsession with the legitimacy of the nation state. The US-Mexico border is in some parts as arbitrary as the lines on the map of Africa drawn up late-nineteenth century European colonialists.

    There are plenty of good arguments against immigration restrictionism. Basing one’s opposition on the presumed illegitimacy of the nation-state would not seem to be the most persuasive line of argument.

  • mike

    so, mass low-skill immigration would have no negative affect on low-skill native workers, yet a “high” minimum wage does? that argument has already been shown to be false, the minimum wage has no effect on employment or wages, because it’s generally not that high, and most workers start above the minimum wage.

    how are borders “arbitrary lines”? i mean, you honestly think we should have no borders? you really think that’s rational? even most laissez-faire economists rarely go as far as to say bluntly, “we don’t need borders”, maybe more tongue-in-cheek like th WSJ, but not seriously.

    ICE “stormtoopers” (a hilarious exaggeration, i think) aren’t “forcefully” splitting up families, no one made those here illegally create families here knowing full well they could be deported on any given day.

  • Michael Enright

    Actually, borders are arbitrary lines. They are not given to us by God. There is no way to use natural reason to say where boarders should be.

    One has no control over where they are born! It seems strange that one has a different set of rights based on where he was born. This is international apartheid. To forcefully remove someone from the country (or prevent entry) simply because they were born in the wrong city is absurd and immoral.

    And yes, mike, this is the government splitting up families. I really don’t care if someone violated the law to be here. Many came here years and years ago, perhaps living in the US longer than you or I. They have started families. There is no reason to punish their family for the fact that their parent(s) broke the law dozens of years ago. Others came here as children, and may not know a single person in their “home country”. They did not choose to come here. To deport these people is unconscionable. They are Americans just like you and me.