Summary:

The Montana Policy Institute announces the release of updated research data on the unemployment effects of minimum wage increases on working-age teens in Montana. The unemployment rate for working-age teens has nearly doubled since 2006 and fewer are actually entering the workforce. Controlling for the job-killing effects of the recession, the research estimates that nearly 1,200 jobs were lost because of state minimum wage increases from 2005 to 2011. Unemployment rates for teens are likely to rise in coming years as the recession persists and the state minimum wage increases annually.

Mandatory Wage Hikes Accelerate Montana Teen Unemployment

Contact:

Glenn Oppel, Policy Director

Montana Policy Institute

(406) 443-4205

Helena – A recently released study indicates that the state’s nearly 50% minimum wage hike since 2005 has resulted in about 1,200 fewer teen jobs, even after taking into account impacts of the recession.

The Montana Policy Institute released those findings in a study examining the effects of higher labor costs on low skilled workers in the state. The study controls for job losses due to the recession and finds that, as the minimum wage increases, employers are less likely to hire teen workers with fewer skills or lower education levels.

“Simple economics dictates that when the cost of something goes up, people will buy less of it,” according to Carl Graham, CEO of the Montana Policy Institute. “Mandatory increases in our state’s minimum wage hurt the very people, those who are just starting out or starting over, that we’re trying to help by reducing the overall number of jobs available.”

Teen employment in Montana is at historical highs. Census Bureau data shows an almost doubling from 10.2 percent in 2006 to 19.4 percent in 2011. Average weekly hours fell 34 percent, from 12.1 to 8 hours,during that same period. Not surprisingly, the percentage ofMontana teenagers employed also declined, from 48.2 percent in 2006 to 36.6 percent in 2011.

Montana’s minimum wage is currently $7.65 per hour, 12th highest in the nation, and one of just 10 that is indexed to inflation. Another increase to $7.80 is likely to go into effect in January, further increasing the costs of employing low skilled workers.

“The Montana Legislature does have options that will encourage employers to put teens to work by getting closer to the market wage,” emphasized Graham. “Ideally, they can repeal the expected state minimum wage of $7.80 starting in 2013 and default to the federal minimum of $7.25. If that’s not possible, they should at least suspend the inflation index that imposes annual increases even during periods of high unemployment.”

The full study is available at www.montanapolicy.org.

 

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