A “Training Wage” Can Get Teens Their First Job – And Jumpstart Their Earning Potential

Have you ever tried to hire an average teenager? A few years ago, when I needed some furniture moved, my mother reached out to some fundraising teenagers on my behalf, offering the wage that I had set. The three boys eagerly accepted the offer, showed up for work and proceeded to demonstrate why it can be so difficult for many teenagers to land and maintain employment. They not only lacked experience, but they required detailed tutoring in seemingly straightforward work. More time was spent teaching them how to lift, move and pack furniture than they actually spent working.

In Oregon, you cannot legally employ anyone, teen or otherwise, for less than $8.50 per hour, even if his actual labor is worth much less. It should be little surprise then, that our population’s least experienced workers – teenagers – had an unemployment rate of 28.8 percent last year (much higher than the state’s rate of 10.2 percent). The national teen employment rate in 2010 was a meager 27 percent, which has dropped substantially since 2000, when it was healthier (but still too low) at 45%.

Such dismal employment levels are what inspired House Bill 3279, for which the Oregon House Business and Labor Committee held a hearing a few weeks ago. The bill would allow teens to work for less than minimum wage (as low as $7.25, the federal minimum wage) for their first 90 days of employment. Sadly, many legislators met the bill with suspicion, fearing it would create an unfair bias in favor of teenage workers. These legislators worry that teenagers would displace adults by being able to work for less.

Six percent of U.S. workers paid by the hour earn federal minimum wage or less. Only four percent of workers older than 25 earned at or below the federal minimum wage in 2010, according to the Federal Bureau of Labor Statistics. But 25 percent of working teenagers earned at or below minimum wage. Multiple studies have shown that most minimum wage workers move ahead to higher wages. A more detailed study of minimum wage workers revealed that few adults, and even fewer parents, rely on their minimum wage job as their primary source of income. Most minimum wage workers are providing a secondary or third source of family income. And most workers, as they build skills, eventually will earn more than minimum wage. Accordingly, it would behoove legislators to help teens build their skills earlier, rather than pricing them out of the market.

Instead, with the bar set too high for many teens, not only are they earning less money to spend and save for valuable investments later (like college), they are not gaining the invaluable experience that will allow them to earn more down the road by developing their skills, or “human capital.”

“Human capital” describes a person’s attributes that increase her earning potential and ability to grow wealth. It includes a person’s “intelligence, educational background, work experience, knowledge, skill and health,” according to Michael Sherraden’s influential book, Assets and the Poor. It is also important to our nation. According to Gary Becker, a prominent theorist, human capital accounts for around 75% of the United States’ wealth, with the rest consisting of capital in businesses, homes, goods, and government capital and cash. It is the proverbial knowledge of how to fish, versus the fish itself.

Teenagers are easily influenced. According to Andrew Sum, Director of the Center for Labor Market Studies at Northeastern University, especially among low-income and minority youth, “[t]he more teens work this year, the more they work next year.” If they do not work now, they are less likely to work later. But with increased experience, teens will earn better wages and be more likely to hold a steady job later. They are also more likely to graduate from high school (developing another form of human capital).

With such a weight of evidence, legislators should reconsider HB 3279. Inexperienced teens need the opportunity to work for a “training wage,” something less than minimum wage, so that they, too, can acquire the skills and experience to earn more in the future.


Christina Martin is Director of the Asset Ownership Project at Cascade Policy Institute, Oregon’s free market public policy research organization.

 

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Posted by at 05:00 | Posted in Economy, Individual Responsiblity, OR 76th Legislative Session, Oregon House, Unemployment | Tagged , , , , , , | 25 Comments |Email This Post Email This Post |Print This Post Print This Post
  • Sickofit

    hundreds of thousands of Americans have lost their jobs due to the dems putting in high minimum wage laws. Just look at an unemployment map and you will see that ALL states with high minimum wages also have HIGH unemployment.
    Wake up to the facts people.
    It is stupid to legislate this kind of garbage.

  • Founding Fathers

    Perhaps there should be a training wage for people like Lars Larson who repeatedly spread falsehoods.

    Let’s see, $3/hr. sounds about right.

    • eaop

      Post serial flake “FF” derides again bearing nebulous nutritional value…save for a possibility the ‘packaging’ might constitute a happy meal for a coyote.

  • Rupert in Springfield

    You know, when Oregon indexed its minimum wage so that it skyrocketed it was predicted unemployment would rise. Well, we have some of the worst unemployment in the nation. Now, obviously part of being a liberal is having absolutely zero introspection so they will never see how they were wrong on this. The thing is do they have to drag down everyone with their dopey ideas? Should some poor teen just trying to get a leg up have to be hurt by the fact liberals can’t admit they were wrong and move on? Nope. So remember, the next time someone on the left tries to pull this routine that “they care more”, “they have compassion” remind them of things like this.

    Watch for diversion in any coming comments “oh yeah, well what about Bush this and Bush that”

    • valley person

      Washington has a higher minimum wage and lower unemployment than Oregon or the national average. South Carolina has no state minimum wage and has higher unemployment than Oregon. Liberals would admit we were wrong if you could actually show we were wrong by looking at unemployment patterns nationally and tying those to minimum wages. But since you can’t do that we aren’t wrong.

      Next question?

      • Sickofit

        10.2 vs. 11 – statistically not important.
        Also, if you are one of the unemployed, it doesn’t matter what goes on in South Carolina.
        Also, that is the only example of all the 50 states.
        Most often a high minimum wage has resulted in high unemployment.
        It happens every time.
        You will also note, if you can, that states with right to work laws have more people, more jobs, more opportunity than closed states like Oregon without right to work.
        It is simply the case.
        So keep dreaming your lib dreams, but don’t lie to yourself. The libs help no one but themselves. Ever.
        Not one person.

        • valley person

          Mississippi and Georgia are also sates with no minimum wage and unemployment at high as Oregon’s. There just is little if any correlation between the minimum wage and unemployment levels.

          And you can’t say “most often” followed by “every time.” That is logically incoherent. Its one or the other, though in this case it is neither.

          Right to work states include South Carolina, Mississippi, and Georgia. They do not have more people, more jobs, or more opportunity than states like Washington or Massachussetts or Connecticut. If your theory were correct all the southern states would have very low unemployment rates. Since this is factually not the case, you need a new theory.

          • Anonymous

            “Mississippi and Georgia are also sates with no minimum wage and unemployment at high as Oregon’s.”

            Except, of course, they do have the federal minimum wage of $7.25 per hour, as do all states without high minimums of their own.

          • Valley person

            They are subject to the federal minimum wage, yes. But they don’t have Oregon’s yet higher minimum wage and their unemployment is just as high as ours.

            Economists who have looked at this issue have concluded that the minimum wage has next to zero effect on unemployment.

            And, I imagine that those behind this so called training wage bill are not the unemployed teenagers or their parents, but the chain restaurant and retail industries. Am I wrong about that?

          • Sickofit

            Here’s the thing. People can always get other jobs if the one they have doesn’t pay enough. All stupid arguments aside, why do you need the government to tell you how much to pay someone??
            It is patently stupid.
            Let the market decide. Please.
            Nanny state politicos don’t know how to run businesses. They have no business telling businesses what to do.
            None.
            You must look to government for the additional parenting you seem to require.
            I don’t.
            I am a man and can take care of myself and others. Without help.
            None.
            None do you hear me?

          • valley person

            No friend, people can’t always find higher paying jobs. Especially not during periods of high unemployment.

            We don’t need the government to tell people how much to pay. We do need the government to set minimum standards of decency, including a floor on pay. The private sector long ago proved incapable of holding humane standards until they were forced to, which is why we had to pass child labor laws, workplace safety rules, and a minimum wage among other basics. “The market” had decided it was fine to send 10 year old kids into unsafe coal mines. The “market also decided it was ok to pollute other people’s air and water. The market decided that subprime mortgage fraud was very profitable. The Market does a lot of things that many of us would rather it didn’t. It has proven time and again that it needs a baby sitter.

            Do I hear you? Sure. No need to shout. I just disagree with you.

          • Anonymous

            You’re probably correct that unemployed teens are not pushing for a training wage – almost by definition they don’t have the skills or knowledge, yet, to understand how this policy might help them.

            Chain restaurants and retail industries might support the training wage, but not because they simply want to push wages as low as possible. I recall that before the recent recession fast food places in Portland were actually paying well above the minimum wage, because that’s what they had to do to attract enough workers to fill their shifts.

            In slow economic times, like now, they could fill their shifts with lower wages, and since they’re prohibited by law from doing so those that are less likely to get the jobs are younger people and those just entering the workforce.

            You may think it’s better to keep them unemployed rather than let them work for less, but others would rather let them make that choice for themselves.

          • valley person

            I’m not convinced that lowering the minimum wage as proposed would result in more employment, though it would likely result in lower pay at low skill jobs.

            The reason unemployment is high is because there are fewer jobs available than there are people looking for jobs, especially at lower skill levels. I suppose we could get rid of the minimum wage altogether and let pay go down to a bowl of soup and a cup of water and we could get to full employment that way, but in a civilized society we set standards of decency, and a minimum wage is part of that.

            I don’t see this as a choice between employing unskilled teenagers or not employing them. To the extent they are unskilled, the investment should be in education and skill development, not in lowering wage rates.

            My family ran a restaurant for years. We hired unskilled teenagers with good work ethics and taught them what they needed to know. Many of them became loyal employees who worked their way up and/or were able to pay for their own college. Of course that was back when tuition was affordable.

      • Rupert in Springfield

        Read what you are responding to, then respond. Its simple math but you always fail. This is why I think I could probably march you into a clinic and have you certified as a classic idiot in the clinical sense of the term.

        I stated that when the minimum wage was indexed in Oregon, free market people said the unemployment would go up.

        It did.

        Since indexing, unemployment in Oregon has gone up, thats the point. Our unemployment is higher than the national average, has remained so for quite a while and that is exactly what the predictions were at the time indexing was passed.

        We were right, you were wrong, and now you will just have to deal with that.

        PS – Your epic fail on the Washington minimum wage comparison was hilarious – They happen to have a teenage “training wage” you boob. I just found the leash and drool cup, shall I schedule your evaluation at the clinic for Friday or would you prefer early next week?

        • valley person

          Rupert, has it occurred to you that Washington’s minimum wage rate is HIGHER than Oregons, yet their unemployment rate is a full point LOWER? And that their rate is also indexed? So why isn’t the unemployment rate in Washington as high or higher than in Oregon? I mean, does your theory only apply to Oregon and no other state?

          You were right? Right about what exactly?

        • valley person

          I just had to re-read this and chuckle. And never mind the clinical idiot part. You don’t really want to go there.

          You are claiming that Oregon’s unemployment went up because we indexed the minimum wage to inflation? Not because we had…oh I don’t know…a national economic meltdown?

          Oregon’s unemployment rate has been consistently above the national average since the early 1990s, yet the minimum wage rate wasn’t indexed for inflation until 2004. How do you then explain the 10 or so years prior to 2004? You can’t. Yet again, you seem to need a new theory.

          Let me try my own theory. You have a belief system called free market fundamentalism. This requires you to ascribe any economic outcome, no matter how random, to your pre-existing assumption that any deviation from absolute free market dogma has some sort of negative economic result. Or to state it another way, any negative economic result must have its explanation in some sort of state deviation from the “free market.” This belief forces you to dismiss evidence that is contradictory. Thus the Washington-Oregon comparison does not compute, and the Oregon-South Carolina comparison does not compute. Instead you go on insisting you have been proven right by narrowing in on a single data point….Oregon’s relatively high unemployment rate.

          Personally, I’m open to the idea that if a single state has a minimum wage substantially higher than every other state, that this might result in a higher level of unemployment, all other factors being equal. The problem is that all other factors are never equal. If that state happens to have a primary industry that is booming (like new gas or oil extraction, i.e. North Dakota,) then it doesn’t matter what the minimum wage rate is. There will be a demand for labor larger than supply and the unemployment rate will go down. If the primary state industry is declining (autos in Michigan, timber in Oregon, textiles in South Carolina,) then it doesn’t matter how cheap the available labor is, the unemployment rate will be high.

          You can manufacture all the explanations you like, and you can cherry pick data to support your desired conclusion, but practical economics is about matching theory to reality, not the other way around. When you go the other way you are in Ayn Rand or Karl Marx territory. Interesting as debating points perhaps. Useless as economic advice or policy.

          • Founding Fathers

            Actually, VP, Oregon’s unemployment rate was consistently higher than the national average in the early 80s, too, when we had a Republican legislature and a Republican governor.

          • Valley person

            And a Republican president.

      • eaop

        VP, you fool: Warshington, like Boregon, has morphed into a bluer-than-blue state that Duz’nt do anything right, only foams off from the mouths of left wing spit bulls.

        In other words, simple dimple (albeit a veddydeep one): Pubic employee unions and minions of lemmings who drink blue-coo Kool-Aid from a lick and promise the private sector pool runs knee-deep and will continue to probide indefinitely. Ha!

        • eaop

          And to both FF and VP, your partisan stands proffering DNC Kool-Aid are so BLUE, the only flavor is “Lapis up the Wazooley” (rhymes with Darlene Hooley) and should carry a warning label about ‘poseable’ side effects including Parchkinson’s Disease, e.g., so constituted before the US Senate by numb other than VP, Joe Biden and Seniletor, Harry Reid.

  • Ron Swaren

    “The three boys eagerly accepted the offer, showed up for work and proceeded to demonstrate why it can be so difficult for many teenagers to land and maintain employment. They not only lacked experience, but they required detailed tutoring in seemingly straightforward work. More time was spent teaching them how to lift, move and pack furniture than they actually spent working.”

    Of course. The understanding of what “work” is has changed. It no longer denotes physical effort (and I include skilled tasks, like physicians) that produces tangible objects of value. It is now includes whatever can occupy one’s mind for the day, be compensated for with money, and not land one’s person in jail. Is it any wonder that our government is printing up more money just to cover this foolishness?

    I won’t merely blame “liberals” either. It seems that even during the Reagan era there was a lot of “wealth creation” that was merely shuffling money from actual producers into the pockets of the cunning and manipulative. Small surprise that in the following decade major white collar crime would emerge as a social phenomenon. The “liberal” educational establishment has now only adopted that mentality for the masses.

    So I don’t really know who is to blame. Is it the high profile heros of greed?….or the simplistic “whatever works for ya” tutors of the young? I remember in the baby-boom generation one of the great failings was that people never did what they said, or promised, they were going to do, short of a promise of legal intervention. As a stopgap measure some religionists invented the “Promise Keepers” movement so that at least they would keep their spouses happy, even if the rest of their commitments were trampled and forgotten.

    Now, the new thing is a completely new definition of “work.” I suppose “trying” will be the next one….Why can’t some basic functions of a civilized and industrialized society be taught, such as: physical-mental coordination that produces value, the importance of contractual obligations, essential understanding of legal processes, what families are for…..

  • Foo

    Brilliant. While we’re at it, let’s also get rid of child labor laws, the 40-hour work week, and cut taxes for the richest 1 percent. That’ll fix the problems we have in this country.

    Could the economic agenda of Republicans be any more transparent?

    • eaop

      Much ado in league with FF and VP – lo, pity, another little red, in this case, Foo choo train gone chugging ’round the bend.

  • Superx294

    This is a great idea. Now all of the poeple in the tech and manufacturing sectors that have had their decent middle class jobs offshored, can lose the replacement McJobs taht paid about 1/3 of their former salaries to teenagers receiving a sub minimum wage. But really, who gives a crap. If they aren’t churning derivatives on Wall Street, or bundling worthless mortgages for Bank of America, they’re just a bunch of parasites anyway. Right?

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