Don’t Forget Young Americans in the Minimum Wage Debate

On Tuesday’s State of the Union, President Obama delivered a bold proposal: raise the federal minimum wage limit from $7.25 to $9. While both Republicans and Democrats seem to be lining up on their usual sides, there seems to be an untouched caveat to the entire debate: the impact on young Americans. Even the Obama Administration, which has been rather sympathetic to the plight of young Americans made it a point to coldly state in their policy document: “raising the minimum wage mostly benefits adults”.

As of this moment, close to 17% of Americans below the age of 25 are actively looking for work and are unable to find it (compared to 7.8% for the nation). However, even more frighteningly, 50% of young Americans are underemployed – working in low-wage jobs that they are severely underqualified for. These numbers are the lowest since 1948, when the government began to track these numbers.

As a result, millions of young Americans with college and graduate degrees are working in retail, fast food, and other low skill jobs – often times working on minimum wage to pay the debt of their astronomically high college tuition and make ends meet. They are increasingly facing a diminishing future not only in employment but in all other facets of their life. Lower employment for young people has often been linked to a pandora’s box of social ills ranging from higher rates of illness and lower productivity in the future to higher rates of crime and illicit activity.

As a progressive, I have no problem with the argument for raising the minimum wage, particularly as it relates to employment. Fellow progressives will argue that raising the minimum wage has no impact on employment, transfers large corporate profits to the working class, raising them out of poverty and reducing income inequality, and induces workers to work harder and creatively (the idea that everyone on minimum wage is low skill is incredibly false and insulting given the high rates of underemployment). Studies also show that for an average one-parent home living on minimum wage, an increase in the minimum wage would also result in an increase in $700 in annual spending to boost the economy. Conservatives will argue that “intuitively” raising the minimum wage would increase the cost of goods and result in less employment.

The reality is that both are right and both are wrong. Studies on both sides show marginal negatives and positives of employment based on the minimum wage but by and large there seems to be a net zero impact on employment from an increase in the minimum wage. In fact, as of this moment 19 states in the United States have higher minimum wages than the federal government and there has been no evidence to suggest that these wages have any impact on jobs. The majority of the effects, therefore lie in changes in income inequality and productivity of workers.

Given the evidence, raising the minimum wage would have a tremendous impact on the lives of young Americans without tremendously impacting employment. For a young college graduate working an average of 20 hours a week at a minimum wage job, they would see an increase of $1900 in earnings – enough to help pay down some of their high interest student debt, groceries, and other living expenses.

No doubt, the conversation around raising the minimum wage should concentrate on women, minorities, and working parents. But just as important to this debate are the 50% of young Americans under the age of 25 that are underemployed and working minimum wage jobs to pay down student debt, move out of their parent’s basement, and make ends meet.

Raising the minimum wage has untold benefits for some of our most vulnerable citizens. But one of the strongest arguments comes from the fact that increasing the minimum wage allows young people who are disproportionately working in these low wage jobs to improve their lives. It is fundamentally an investment in the future and ignoring this important demographic will only have negative repercussions down the line.


As always, I am always open to emails at timothy.t.hwang@gmail.com, tweets at @timthwang, and Facebook messages at timthwang.

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2 comments

  1. I have to agree with you on this one but there is always that old problem that whatever someone earns, they always tend to find a way to live at the upper limit of their income. Human Nature, I guess.

  2. Glad to see you’re back, Tim! Keep up the great work.

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