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Source link: http://archive.mises.org/17590/the-jobless-summer/

The Jobless Summer

July 5, 2011 by

It’s excellent that the Wall Street Journal has broken the public silence on a critical issue of our time: young people are being all-but completely shut out of the workforce and thereby being denied crucially important life skills at a time when their job prospects after college are also being seriously diminished. The work ethic and work competence of a generation is being demolished. This is truly tragic and evil, and it’s good that the WJS has spoken to the issue.

The Journal places the blame on the high increases in the minimum wage that have been passed by Congress, and surely this is one major reason for the shutout. There are other reasons too: the higher costs of hiring due to taxes and liability, the recession, the near absence of new small businesses that can hire anyone, the difficulty of firing, and the risky business environment generally due to regime uncertainty.

Nonetheless, the WSJ is under assault for merely having mentioned the minimum wage as a source of the problem. This site wags the finger at the paper for daring to suggest such a thing, pointing out, for example, that businesses, under federal law, do not have to pay the minimum wage for the first 90 days provided “their work does not displace other workers.” In other words, if the employee is essentially useless, you can pay only $4.25 and only after 90 days, at which point they become useful and thereby displace some other hire (?), they must be paid $7.25. Brilliant! What liberality our federal masters have afforded American business! You would have to be a blogger who knows nothing about real business life to think that such an exception can really mean anything in the real world.

What could possibly be the point of a wage floor except to exclude those workers who fall beneath it? I mean, it is not rocket science here. Clearly there is a point to this legislation and it is precisely to exclude young workers who would likely compete with existing workers. This is why labor unions have always pushed for minimum wages; they want to firm up the cartel. We are naive if we think that the effects of a wage floor are not understood by everyone who pushes for them. In other words, these laws are working precisely as they were intended to work.


Nate July 5, 2011 at 5:41 pm

Clearly there is a point to this legislation and it is precisely to exclude young workers who would likely compete with existing workers.

I’m afraid that you err in thinking that this is why the average person supports the minimum wage; rather, this is what we must convince them of. Instead, people generally believe that everyone who would otherwise earn less than the minimum wage instead receives a raise that brings them up to it, not that they get laid off or never hired to begin with.

nate-m July 6, 2011 at 12:38 am

The reason why the ‘average person supports the minimum wage’ is irrelevant.

Why the minimum wage was created and what propaganda people are told about the minimum wage why it was created are two entirely different things.

It was designed, specifically and with full knowledge, to keep wages up by excluding marginal producers out of the work place to prevent competition with higher skilled, higher priced labor.

Vincent Cook July 5, 2011 at 5:54 pm

Jeffrey raises an excellent point here. To put this into better perspective, it helps to look over a longer time frame. Recently, I became curious about how things had changed since I got my first job back in the late 1970s. I came across Bureau of Labor Statistics numbers which show that the percentage of teens employed back then was about 60%, versus less than 25% today. There is both a persistent downtrend and occasional downward spikes in teen labor force participation, with the spikes associated with bust phases of economic cycles (notably the current depression).

The summer job represented something more than even the acquisition of a work ethic, of important work skills and in some cases even of leads for a future career; it was also an important step in becoming an independent adult. Getting an allowance or a student loan is no substitute for the experience of earning something through your own productive efforts. What does it mean to our culture, let alone our economy, to rob young men and women of their budding autonomy and keep them begging for money well into their 20s?

Windows Hater July 5, 2011 at 7:15 pm

“it was also an important step in becoming an independent adult.”

If you can’t call your boss a jerk once in a while when he deserves it without fearing being fired, then you are not independent. If you depend on your boss and live paycheck to paycheck, you are not dependent.

I think this whole school-college-employment scheme is just a scam. People should be true independent entrepreneurs producing wealth and being paid on the wealth the produce, not on the time they worked.

Captain Anarchy July 5, 2011 at 8:51 pm

Hear, hear. In a free market, there would be far more entrepreneurs, and a diminished boss-employee paradigm. I’m an ancap, but I really think we need to move away from a boss-worker mindset and into a mutually beneficial exchange mindset.

As for the article, the guy doesn’t know what he’s talking about. Increases in minimum wage cause increases in unemployment and shutting out of workers on the margin. This is basic normative economics for Pete’s sake. Of course, average commentators such as Invictus in the link might as well be rolling the bones to divine economic facts because they have no real underlying theory.

nate-m July 6, 2011 at 12:52 am

I’m an ancap, but I really think we need to move away from a boss-worker mindset and into a mutually beneficial exchange mindset.

A lot of people that work for a living don’t give a shit about their job beyond their pay. They are not interested in a mutually beneficial relationship, nor do they give a crap about the future of their company. They need a boss to monitor them and tell them what to do and be aggressive or they simply won’t do it. They will sit around and spend much more time dodging work then actually working if you let them. They will be abusive to customers and abusive to equipment and will look for excuses why they can’t work, unless you lean on them.

Being a entrepreneur requires drive and the ability to take measured risks. There are winners and their are losers. A great number of people don’t want to run the risk. They’d much rather have a shit job they just shuffle along with until somebody gives them a better offer then risk their job in the chance they can make much more money.

I don’t see why they should care about the future of their company or give a crap beyond a the next paycheck, either. They have different priorities and a hourly wage is just a means to a end. Of course this is why they are not worth much in the market place.

The majority of these people are going to be teenagers, btw.

The only way a worker can move past the boss-employee adversarial relationship is that:
1. They start their own business
2. They become valuable enough that the company is forced to be nice to them and cater to their personal BS due to the economic necessity.

Lots of people would be surprised how much more pleasant work is when they reach the skill level were leaving a corporation is much worse for your boss then it is for you. But getting to that level requires a lot of effort and self determination… of which many workers simply don’t give enough a shit about.

Eric M Staib July 6, 2011 at 2:39 am

“A lot of people that work for a living don’t give a shit about their job beyond their pay.”

Nowhere is this more true than in my generation (16-25). It’s hard to find a young person who gives even half a damn about anything beyond drugs, sex, and cheap amusement.

We are the negative interest rate generation, and it shows in the behavior of the majority of our members.

RAlph July 6, 2011 at 10:50 pm

Your synopsis reminds me of Elbert Hubbard’s “A Message to Garcia”, one of the most popular essays written over 100 years ago.

Invictus July 6, 2011 at 7:32 am

Far from divining economic facts, I actually presented some. Several, actually. Yet no one seems to want to refute the demographic data I presented or the fact that the Journal was silent on the decline in the Teen Emp/Pop ratio decline during the Bush Boom. Can we debate the data, or not?

Dagnytg July 6, 2011 at 5:01 pm


The problem with charts and statistics in general is they are only as good as the inputs. The moment they’re used inputs become static and obsolete; limited in their ability to predict the future and assess the past. (Also, they are vulnerable to multiple interpretations.)

The other mistake is assuming wages and employment are related. In a freed market, wages (like prices) only represent supply and demand of a particular skill or job. In such a market, there would be a wage for all jobs and unemployment would be nearly nonexistent.

In the unfree market we have today, employers have other expenses tied to hiring a person: workers comp., unemployment insurance, social security, healthcare, and a slew of state and federal labor laws…so the minimum wage is most likely the least of their concerns.

However, combine the minimum wage with these other variables and it is easy to see why youth employment has been falling since 2001. (Essentially the cost of hiring an inexperienced worker has exceeded the cost of hiring an experienced worker.)

You also make the macro assumption that in boom times all boats rise equally. Your chart (teen ratio) clearly shows that’s not true.

J Oxman July 6, 2011 at 7:53 am

Actually, it’s positive economics.

Vincent Cook July 6, 2011 at 2:21 pm

Some people become jerks precisely because they sense others are afraid of them–standing up to a bad boss might get you fired, but on the other hand it might curb the jerk’s misbehavior. Smart employers know that instilling a sense of mutual respect and professionalism into a workplace can reduce turnover, increases productivity, and even reduce payroll costs, so they ultimately can’t afford to indulge power-tripping by their lower-level managers.

In any event, how does being fired (or quitting) compromise your independence? Breaking off dysfunctional relationships and seeking out better opportunities for yourself is part of being an independent adult too. While changing jobs isn’t costless, nonetheless it is certainly feasible in an unhampered market economy. Moreover, in a situation where the parents are still paying most of the bills anyways, there is even less at stake for the teen employee.

Of course, if minimum wages and other interventions are keeping vast numbers of teens unemployed or out of the workforce, bosses will have more leeway to act like jerks, since they know that uppity teens can be easily replaced. However, this only reinforces Jeffrey’s argument. It is precisely the existence of a labor surplus due to artificially high wages and benefits and of cyclical unemployment due to inflationary credit expansions that renders the individual worker expendable and therefore vulnerable to abuse.

As far as entrepreneurship goes, I think it would be great if more teens (and everyone else for that matter) also had more opportunities to go into business for themselves. However, one shouldn’t harbor the illusion that owning your own business somehow frees you from the necessity of serving others. As Mises observed, in a market economy it is the consumers who are the ultimate bosses. Any of the other people a business owner deals with can be jerks too.

Let’s face it–jerks can be anywhere. Unless one lives in complete isolation from society, an independent adult can’t avoid the costs of dealing with jerks. However, the hallmark of independence is that you have the freedom to break off your relationships with jerks and thus limit the costs without undue suffering. A healthy, competitive marketplace fosters such personal autonomy by making it relatively easy to find alternatives to the jerks. This is true whether we are talking about the job market or about any other market, so it is not the case that an entrepreneurial role necessarily entails greater personal independence than the employee role does. The question of who is more vulnerable to jerks depends on the particular circumstances.

Capn Mike July 5, 2011 at 7:01 pm

Another good (vital) point that Jeff makes:

The minimum wage law is working as intended. But that *TRUE* purpose is not revealed to the sheeple. Same with almost ALL “failed” govt projects. They’re working all right and Boobus would be aghast at what the true motives are.

Shay July 6, 2011 at 4:20 am

Sorry, I stopped reading your post once I hit the word “sheeple”.

integral July 6, 2011 at 7:51 am

I had the same problem

Perry Mason July 6, 2011 at 9:32 am

Most sheeple do.

vergilius July 6, 2011 at 10:18 am

Sorry, I stopped reading your post once I hit the word “sheeple.”

Horst Muhlmann July 6, 2011 at 12:22 pm

Oh yeah? Well, I stopped reading YOUR post once I hit the word “sheeple” ;)

Capn Mike July 6, 2011 at 5:01 pm


Concerned Friend July 5, 2011 at 9:39 pm

In the words of Thomas Sowell, the real minimum wage is always zero.

DD5 July 6, 2011 at 4:51 pm

Then Thomas Sowell would be wrong if he really said that. There can be negative wages; you paying your employer to hire you. There are many reasons for why this may be a perfectly rational choice in a free market.

Capn Mike July 6, 2011 at 5:03 pm

After taxes, I sorta feel like I’M working for negative wages.

But you have a valid point. Bring back apprenticeship! (seriously).

Bruce Koerber July 5, 2011 at 10:01 pm

Why Are The Young Unemployed?

As the interventionists shackle the entrepreneurs the miseducated who were fed the propaganda of Statism feel dependent on the State. This is the system.

Hopefully education via the internet will cause an awakening and the unConstitutional coup will be chased into oblivion!

Pablo July 6, 2011 at 12:07 pm

The minimum wage is a benefit to the employed at the expense of the unemployed. So instead of employment for anyone willing to work and freedom to negotiate wage rates, it is unemployment payments that are difficult to call with a straight face a “living wage” and then once that ends an unemployed person becomes persona non grata.

Ohhh Henry July 6, 2011 at 3:50 pm

Little Bush wasted no time after getting elected in betraying his core supporters, the small-government conservatives.

First thing Obama does is hoof his core of supporters in the privates, namely young people and the anti-war crowd.

Proving once again that voting is a waste of time.

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