No Job For You!

In the first State of the Union address of his second term, President Barack Obama called for a minimum wage increase, reigniting a debate about the efficacy of such laws.

Obama’s case for a minimum wage increase was largely a moral one. The President explained:

A family with two kids that earns the minimum wage still lives below the poverty line. That’s wrong…Let’s…raise the federal minimum wage to $9 an hour. This single step would raise the incomes of millions of working families.

The President’s intention may be good, but the economics are terrible. What Obama failed to mention is that minimum wage paying jobs are most often held by young people just entering the workforce (like our friend Julius).  In the face of additional expenses employers will be less likely to hire those young, inexperienced workers.

We don’t have to speculate. We already know what these laws do. Previous presidents who have also made a moral case for minimum wage ended up hurting the very people they intended to help. A broad review of the effects of minimum wage conducted by the Employment Policy Institute found clear evidence of the negative effects after President Clinton successfully pushed for a minimum wage hike:

Employment for teenagers — who largely make at or near minimum wage — actually fell in the year after the initial Clinton minimum wage increase in October 1996.

If Obama gets his way the results will be no different.

On the plus side, even if an increase in minimum wage leads to fewer entry-level jobs, at least we will still have plenty of unpaid internships to help young people gain valuable work experience. Oh, wait, never mind. Those prized opportunities are also currently under attack.

Unpaid internships are being targeted by students and graduates who claim they are “unfair” and “lead to an elitist gap.” In 2012, for example, former intern Lucy Bickerton filed a lawsuit against the television host Charlie Rose and his production company after her mother, an employment lawyer, told her that her internship was “unethical.” Along with 190 fellow former interns, Bickerton accused the company of using them to substitute for full-time staff, a violation of New York State wage laws. After the company settled for $250,000 (although it did “not admit any liability or wrongdoing”), Bickerton exclaimed that the settlement was “a really important moment for this movement against unpaid internships.”

This isn’t something to boast about. Employers hire interns knowing that they are inexperienced, but are willing to teach and train them since their labor is free. If employers are forced to pay their interns, they would offer fewer internships altogether. As a result, young people will have fewer gateway opportunities for entry-level positions.

Writing for The Wall Street Journal, Steve Cohen responded to the Charlie Rose litigation and defended his own invaluable experience as an unpaid intern at a law firm:

An internship isn’t a substitute for minimum-wage work. It is an audition. Changing internships from the exposure-audition model to a minimum-wage model may serve labor activists, but it won’t serve ambitious college students or the companies seeking them.

The unemployment rate for ages 19-21 is already at 13.1 percent—much worse than the national average. This demographic is already hurting badly and increasing the minimum wage or eliminating unpaid internships will only worsen their prospects.

How can you climb the ladder of success if there is no bottom rung?