Is Inflation Boosting Teen Employment?


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Summer is approaching, and the summer job may be coming back in a big way for teenagers.

Working full-time over the summer—as well as part-time during the school year—was once a common rite of passage for teens. But teenage employment declined for decades as parents, teachers, and school administrators piled more and more academic demands on kids.

But teen employment has been rising amid the pandemic. In May of last year, unemployment among 16- to 19-year-old workers reached a 68-year low of 9.6 percent, as The Wall Street Journal noted Sunday. And we are nearing that record once again, according to numbers announced by the Bureau of Labor Statistics on Friday which have the rate at 10.2 percent. “Overall, about a third of U.S. teens in that age group are now working,” the Journal reports.

Why are teens flocking back to work? Adults have not been so keen to keep a job, resulting in a labor shortage that has pushed up wages. That higher pay is surely one draw. Also, as the schooling experience has been persistently chaotic throughout the pandemic, teens and their parents may see a job as a welcome source of structure and learning experiences.

Another factor may be inflation.

Perhaps the only silver lining of price inflation is that it blunts the impact of price floors like the minimum wage, which is a floor for the price of labor.

The minimum wage is one of the prime culprits for teenage unemployment. Teenagers are at the beginning of their careers, so they haven’t had a chance yet to develop the skills necessary to do the kind of work that would bring in very much money for their employers. This puts a relatively low ceiling on the wages that an employer can afford to pay them.

If the floor set by the minimum wage is higher than the ceiling set by a teen’s skillset and economic reality in general, that doesn’t leave any room for the teen to get a job.

And that is highly unfortunate for the teen, because job experience is the most effective way to develop the skills necessary to earn higher wages. So the minimum wage is like knocking out the bottom rungs of the economic ladder.

And contrary to common rhetoric, the economic ladder can be enjoyable and fulfilling to climb, even at the lower rungs and even for teens. Take for example Makayla McDonald, a 17-year-old in Montgomery, Ala. who will be returning to a lifeguarding job she first got a year ago and who was interviewed by the Journal:

“I really like working,” said Ms. McDonald, who divides her paychecks between college savings, church contributions, a fund for a loungewear business she hopes to start and spending money to get her hair or nails done. “My mom is a single mom, so I got to see the value of working hard and getting paid for it,” she said.

Last summer, Ms. McDonald worked 8 a.m. to 5 p.m. six days a week manning a lifeguard stand in the Alabama heat and reminding swimmers to walk, not run, on the deck. The job had its challenges—frogs from a nearby creek would sometimes find their way into the pool. Still, she bonded with her co-workers and relished the $10 an hour she earned.”

Had the “Fight for $15” minimum wage campaign prevailed in Alabama, Makayla would have lost her summer lifeguarding job, depriving her of all the above benefits.

How does inflation affect this? When new money is pumped into the economy (as the Federal Reserve has been doing like mad, especially during the pandemic), it bids up prices (including wages) across the board. This is a losing proposition for most, because the prices of what they purchase rise sooner and faster than the prices of what they sell (including their labor).

Real income may not be going up, but nominal wages are. So teenagers whose skills would have commanded less than the minimum wage in pre-inflation terms may be able to earn above the minimum wage in terms of the now-devalued dollars. As a result, many more teens are able to actually get a job and all the benefits that come with it.

And so one bad policy (monetary expansion) counteracts another (the minimum wage).

This is not to praise or welcome monetary expansion, or any of the other big-government responses to the pandemic that may have contributed to the recent rise in teenage employment. The harms surely outweigh the benefits. But so long as it’s happening, we should at least preserve the silver lining explained above by not raising the minimum wage to “keep up” with inflation.

Teens are heading back to work this summer. That should not only be allowed, but encouraged.

This article was adapted from an issue of the FEE Daily email newsletter. Click here to sign up and get free-market news and analysis like this in your inbox every weekday.



* This article was originally published here

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