Project 21 News


Date of Issue: December 1, 1995
Contact: Project 21 at (202) 507-6398


Minimum Wage Increase Would Increase Teen Drop-Out and Unemployment Rates, Says African-American Group

Project 21 Critical of President's Proposed Minimum Wage Increase


An increase in the minimum wage to $5.15 an hour, as President Clinton proposes, would drive teenagers with few skills out of the workplace and out of the schools, say members of the African-American leadership group Project 21.

According to a new study by David Neumark for the Employment Policies Institute, an increase in the minimum wage would have the perverse effect of increasing both the school dropout rate and teenage unemployment. This is so because higher mandatory minimum wages will entice some students into sacrificing school for work while at the same time compel many employers to forgo hiring low-skill teenagers in favor of older employees whose experience makes them worth hiring at higher wage rates.

"As this study shows, raising the minimum wage serves only to play into the hedonistic young adult's mindset of instant gratification, of always choosing now over later. Minimum wage increases are a prescription for underachievement because it gives young people the incentive to choose low-skill jobs over long-run human capital formalization," says Project 21 member C. Mason Weaver, Chairman of the Committee to Restore America (based in Oceanside, CA). Weaver continues, "the income sacrificed and skills forfeited by young people who do not graduate are the hidden costs associated with an increase in the minimum wage. This is an example of the President doing the politically expedient thing, not the economically right thing -- at the expense of the nation's long-run competitiveness."

The EPIF study, entitled "The Effects of Minimum Wages on Teenage Employment, Enrollment, and Idleness," also shows that youths between the ages of 16-19 who work while in school could decrease as much as 15%. These youths often are driven out of their jobs by higher-skilled teenagers who, ironically, may have dropped out of school to take advantage of an increase in the minimum wage.

Neumark also points out that many low-skilled youth never become employed while in school because higher-skilled teenagers are hired by employers seeking to offset an increase in the minimum wage. Prevented from acquiring work skills while in school, these teenagers are often deprived a place in the workforce even after graduation because of their lack of skills. Since minorities often compose a larger portion of the less skilled workforce, they are disproportionately affected by an increase in the minimum wage.

"It should be noted that raising the minimum wage would bring hardship to small businesses, especially those involved in labor intensive industries, by increasing labor costs," asserts Project 21 member Celes King, also the Chairman of the California Chapter of the Congress of Racial Equality. "It would also adversely affect the workers, especially young workers as this study illustrates, who are never hired to begin with because they would be priced out of the labor market. Also, it can be argued that raising the minimum wage is not fair to the working poor. Imagine if you started working at $4.25 per hour (the current minimum wage) and you work your way up to $5.15 per hour. When the minimum wage is increased to $5.15, a person just starting will have the same wage rate as you even though you have been working for months. Facing this reality, many employers feel compelled to increase wages for every employee except for those who they lay-off to pay for the wage increases."

"It simply is not a good idea for the government to set arbitrary wage rates," adds Project 21 member Norman Reese, Chairman of the Solano County, California, Republican Assembly. "Since raising the minimum wage is so politically popular, why not set the minimum wage at $25 per hour? The government should not be in the business of deciding what a person is worth in the marketplace. Market forces should set wages, not politicians."

Project 21 is an initiative of The National Center for Public Policy Research to promote the views of African-Americans whose entrepreneurial spirit, sense of family and commitment to individual responsibility has not traditionally been echoed by the nation's civil rights establishment.


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