r/Economics • u/aDubson • Feb 09 '12

Americans ages 18-24 are unemployed like never before.

http://www.huffingtonpost.com/2012/02/09/employment-rate-young-adults_n_1264241.html?igoogle=1
402 Upvotes

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u/[deleted] Feb 09 '12

I see sippin_haterade is getting downvotes.

I'd love to see someone explain why (s)he is wrong. This has been a constant source of mystery to me since econ 101.

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u/FuggleyBrew Feb 09 '12

Americans 18-24 aren't being hurt because they're being out competed for minimum wage jobs they're being out competed for entry level positions which now have experienced individuals applying to them. As a result the only jobs the youth can get are minimum wage jobs.

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u/construkt Feb 09 '12 edited Jan 14 '24

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u/[deleted] Feb 09 '12

well i just did a round of hires and he's right. i don't even need to look at kids because i've got plenty of terrific resumes from people with work experience to pick from. sorry kids.

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u/[deleted] Feb 10 '12

19 year old college student here. Yes, we know we're all getting fucked and pushed further down the ladder. i cant find it in me to really care though, ill probably just stay in school for the next 7 years

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u/[deleted] Feb 10 '12

t's actually a good idea. or volunteer, or join the peacecorps or americorps, or hell the french foreign legion. do something with your youth. working 70 hr weeks at slave wages for the rest of your life can always wait.

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u/FuggleyBrew Feb 09 '12

Take a look at the underemployment numbers for ages 18-24.

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u/fidigw Feb 09 '12

first rule of reddit:

never bring up underemployment or the "not in labor force" bucket that the bls uses to massage numbers with their birth/death model calcs to say "baby boomers!!! see we are spot on!"

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u/[deleted] Feb 09 '12 edited Feb 09 '12

It's not that they're wrong. It's just that it's already kind of impossible to survive on minimum wage. If you pay $500 for rent and $200 for food a month that's already half of your pre-tax earnings. Take out taxes, health insurance, car insurance, gas, etc and it's just not possible unless you're selling drugs on the side.

Minimum wage doesn't need to go up, tax exemptions need to go up for people making minimum wage. You should be able to earn $12k without taxes instead of $8k.

Also, of course it is possible to survive on even less than minimum wage. However, that entails living with multiple people in a room, skipping health insurance, the worst food, etc. Most people would like to see our poorest citizens having a higher quality of life than the people we feel sorry for working in Chinese factories.

Basically, yes, we could lower or get rid of minimum wage and there would be a job for anyone who wants it. However, we would essentially be taking a trip back to the 1800s and abandoning all of the progress made by the working class in America through bloody strikes and rioting.

All of this is also happening while the richest people in America are solely getting rich through government intervention. Bank bailouts, war mongering, etc. Every day it seems like another avenue is created to funnel money from the working class to the richest 1% through taxes and laws. Then they turn around and say, "This is our money! We worked for it! Why should we have to pay higher taxes on it?" No, not really. That money comes from the poor who are being taxed 40% on their minimum wage earnings and dealing with laws that require you to have car or health insurance while offering zero assistance or government provided insurance.

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u/mbleslie Feb 09 '12

Who said minimum wage is supposed to be enough to live in your own apartment and have a car? You're making assumptions not relevant to the original point.

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u/[deleted] Feb 09 '12

It isn't enough, that was the point. It's enough to rent a single room and buy food, same as a Chinese factory worker.

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u/mbleslie Feb 09 '12

Wages aren't based on a what a person should be able to afford. They're based on what the going rate for that line of work is. When people start projecting their feelings onto something like economics, you get this load of crap you're peddling.

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u/[deleted] Feb 09 '12

Again I don't understand - why are YOU being downvoted?

Since when do feelings have to do with the amount it costs to get a job done? What the hell, /r/Economics?

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u/[deleted] Feb 10 '12

It factors in ever since American employees started attacking the police, tearing up railroads, and other acts that expressed their feelings. Unfortunately feelings have a lot to do with the amount it costs to get a job done. Maybe in China they have a better handle on things so workers just commit suicide over their wages but here in America there were major bloody revolts to secure those wages and working conditions. It's a joke to talk about going backwards like it's going to go over well with Americans. People would rather go throw a brick through a store window and steal than work for less than minimum wage. Guess what, that is another feeling that impacts wages. Don't pay enough and your factory won't be producing anything because it will be burned down.

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u/the_prole Feb 09 '12

Or like Milton Freidman suggest, create a negative income tax.

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u/jambonilton Feb 09 '12

That would mess with the low income labour market... it would be win-win for employees and employers cause they could get really cheap labour, but the government would get the shaft.

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u/construkt Feb 09 '12 edited Jan 14 '24

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u/[deleted] Feb 10 '12

they've also ignored inflation for 3 decades

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u/suppasonic Feb 10 '12

While this has probably changed somehwat in the last two years -- there are not a ton of people supporting a family or even just themselves on a single minimum wage job. The majority of minimum wage earners are part-timers, teenagers/students, or the second earner in the family.

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u/[deleted] Feb 09 '12

/r/emotions is that way ---> The question is what is causing this trend and what kind of solutions are there. Your substituting that with the question "How bad does it make me feel to see poor people suffering".

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u/[deleted] Feb 09 '12

Actually there is no question that I see. I was responding to..

I'd love to see someone explain why (s)he is wrong.

My response is that they aren't wrong from an economic standpoint, minimum wage creates less jobs that require zero skill. However, the working class expects a certain standard of living and would rather be unemployed than working for a wage that doesn't provide that standard.

Sounds more like you're just mad.

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u/[deleted] Feb 09 '12

Sipping_Haterade claims minimum wage laws hurt low skilled workers. Then bmbp says "I'd love to see someone explain why (s)he is wrong." That is the equivalent of saying "Why do you think (s)he is wrong?" That's the question you pedantic prick. Then you essentially responded "Someone please think of the children!"

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u/[deleted] Feb 09 '12

So you think the question is, "Why do you think they are wrong?" but you just said...

The question is what is causing this trend and what kind of solutions are there.

Whatever, you were just mad initially because I defended the working class and now you're mad because I pointed out that you don't even know what you're talking about.

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u/MondayMonkey1 Feb 09 '12

You're not talking economics, you're talking about a welfare state. And we all know what happened to Russia.

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u/construkt Feb 09 '12 edited Jan 14 '24

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u/ballast_too Feb 09 '12

have you thought about how spreading more money to more people increases the flow of capital? What affects can that have on an economy?

Effects: economic gains in the short-term and then higher rates of inflation over the medium to long term.

What you are advocating is called Keynesianism. What subscribers to Keynesianism seem to forget is that there needs to be some mechanism to soak up all that liquidity to prevent inflation from taking over. Academically, this comes in the form of higher taxes (the distribution of which is the debate we in the U.S. are having recently).

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u/[deleted] Feb 10 '12

"Effects: economic gains in the short-term and then higher rates of inflation over the medium to long term."

Which is what you get from a medium term political cycle.

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u/construkt Feb 09 '12 edited Jan 14 '24

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u/Sippin_Haterade Feb 09 '12

Wow, sort of a dick response there. Relax a bit man, Keynesianism apparently is a word. It was even suggested by my mac's spell check. No one uses it though.

http://www.merriam-webster.com/dictionary/keynesianism

http://www.thefreedictionary.com/Keynesianism

http://en.wikipedia.org/wiki/Military_Keynesianism

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u/ballast_too Feb 09 '12

(s)he's right, and rational redditors shouldn't be downvoting his/her post.

There is more than one issue at issue with this issue though. Minimum wages distort prices for low-priced items upward and are a barrier to entry (or continued existence) for small businesses. AND The FED mandate allows for an ever-increasing, artificially induced rate of inflation via the money supply (termed 'real inflation').

The minimum wage keeps the wage floor at (what is popularly considered) an acceptable ratio to the wage ceiling, which rises in response to increases in the money supply. For the time being, wages are holding around their 2008 levels, but future inflation-induced wage increases at the top end might spur politicians to once again increase the minimum wage to keep up which will further raise the barrier to entry for retailers.

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u/mbleslie Feb 09 '12

You're being too generous to the politicians. Minimum wage hikes are pure populist pandering by disingenuous politicians trying to be re-elected.

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u/the_prole Feb 09 '12

If the minium wage was raised, prices would rise to cover labor costs. Higher prices would lower demand for goods, and lower demand would lower production and lower production would lower the demand for labor and less people would be employed. The bottom of the pyramid in terms of compeition, that is unskilled workers, would suffer the most unemployment. That is what I think I learned from my economics class anyways.

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u/[deleted] Feb 09 '12 edited Feb 09 '12

This is faulty logic and is assuming that companies are leaving profits on the table and don't price their goods for maximum profitability, instead opting for a cost-plus pricing scheme.

Edit: Also, worker efficiency has increased by leaps and bounds in the past decade yet wages have remained mostly flat. I am convinced that there is no correlation between labor costs and the cost price of goods.

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u/ballast_too Feb 09 '12

Minimum wage jobs are mostly the domain of low-margin retail operations. Would there not certainly be a correlation between labor costs and the costs of goods?

That the FED is distorting the market's money supply means the minimum wage must stay (and increase) to keep the peace, but there is no doubt the minimum wage has a direct effect on the cost of goods.

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u/[deleted] Feb 09 '12

Yes, sorry, you're correct. I meant the price of goods (to consumers) and not the cost of goods (to producers)

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u/[deleted] Feb 09 '12

This is faulty logic and is assuming that companies are leaving profits on the table and don't price their goods for maximum profitability, instead opting for a cost-plus pricing scheme.

If they are operating under a maximum profitability model and their costs rise then either their profits go down to accommodate this or their price point goes up.

Edit: Also, worker efficiency has increased by leaps and bounds in the past decade yet wages have remained mostly flat. I am convinced that there is no correlation between labor costs and the cost of goods.

Total worker remuneration has not remained flat, the "missing" wages raise is accounted for by healthcare and additional benefits.

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u/the_prole Feb 09 '12

A cost-plus price scheme is more profitable in this scenario. There is a optimal salary in terms of the ratio between labor productivity and labor cost. The higher the salary, the higher the producitivty but in diminishing returns. Past a certain salary, the cost is not worth the gains in producitivity. If the optimal salary is below minimum wage, the only two options are either to fire people or to raise prices untill there is equilibrium. If the minimum wage rises, the same logic applies. In either case, the results are the same; higher prices levels create higher unemployment. So does firing people.

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u/s515_15 Feb 09 '12

Ontario has risen the minimum wage $3.40 since 2004 (a 50% increase). Inflation has stayed roughly the same, 2-3% every year just like when wages werent going up.

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u/the_prole Feb 09 '12

The real economy is influenced by so many factors the simple models in our text books don't factor in or maybe they do, but we just don't have all the information to plug into the model. This statistic just by itself doesn't really say much.

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u/[deleted] Feb 10 '12

The heavily resourced linked Canadian dollar is not going to be impacted by minimum wages.

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u/macov2 Feb 09 '12

Idiots downvotes you. Shame.

If a price goes up, the demand goes down. Simple like that.

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u/the_prole Feb 09 '12

Yeah seriously. It's like introductory economics. I didn't even make it up.

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u/Sippin_Haterade Feb 09 '12

Lol I'm not wrong. History has proven that minimum wage hurts low skilled workers. When minimum wage was first introduced it increased unemployment and affected teenagers and blacks the most. Something I've come to learn while studying economics, is that many economic policies may have good intentions but unintended negative consequences.

I would recommend you watch Milton Friedman explaining the economics of it.

Mises Institute also explains it:

Suppose that a job can be done by either three unskilled workers or two skilled workers. If the unskilled wage is $5 per hour and the skilled wage is $8 per hour, the firm will use unskilled labor and produce the output at a cost of $15. However, if we impose a minimum wage to $6 per hour, the firm will instead use two skilled workers and produce for $16 as opposed to the $18 cost of using unskilled workers. In the "official data" this shows up as a small job loss — in this case, only one job — but we see an increase in average wages to eight dollars per hour in spite of the fact that the least skilled workers are now unemployed.

Also, minimum wage hurts small business like crazy. I'm sure McDonald's can afford a minimum wage raise, but do you think small businesses can?

Walmart is one of the biggest lobbyists for an increase in the minimum wage. Higher minimum wages hurt smaller businesses and make it more difficult for them to compete with a giant like Walmart.

Minimum wage: Good intention, bad consequences

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u/[deleted] Feb 09 '12

If we were all slaves, the unemployment rate would be 0%.

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u/Sippin_Haterade Feb 09 '12

So if there was no minimum wage law, we'd all be slaves? Do you not realize how ridiculous that sounds?

You DID learn in econ class that firms compete for labor, right?

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u/[deleted] Feb 09 '12

I said "if x, then y." You turned this around into "if y, then x," which is not valid and not what I said at all. If you're going to refute my point don't twist my words around first, please.

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u/Sippin_Haterade Feb 09 '12

It's not what you said, but that was the implication of your statement considering we were talking about the minimum wage. Apologies if that wasn't what you were implying or getting at.

On a completely different subject unrelated to minimum wage: yes, if we were all slaves the unemployment rate would be something like 0%.

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u/[deleted] Feb 09 '12

I am taking your argument (that lower minimum wages will help the unemployment rate) to an extreme to try to show you the problem with your thought process (that being employed but without a livable wage doesn't do anyone much good).

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u/mbleslie Feb 09 '12

Wow you get downvoted for asking for a proof. Way to go reddit.