MSJMain Street Journal
November 2009
p. 8

Memphis parents are still raving about this summer’s youth employment project, what one Mid-South mom called “the most unorganized, absolutely ludicrous program ever.

Federal and state auditors have spent the last several months sorting through records to find out just how badly local officials mismanaged $4.9 million in federal funds released by the otherwise wildly successful American Recovery and Reinvestment Act.

About 3,000 participants, ages 14-21, were to be placed in jobs paying the federal minimum wage of $7.25 an hour. According to the Commercial Appeal, “many of the young people were not paid properly, including nonpayments and overpayments.” The program’s executive director told the paper administrators “were unprepared to handle the stimulus money and resulting massive influx of youngsters.”

Humorously, a CA staff editorial in March had declared that the stimulus funding for summer jobs would be “money well spent.” Such has not been the case for most of the federal “emergency” spending released to date, thanks to a “shovel-ready” formula whereby only those projects satisfying dubious qualifications and meeting unrealistic timelines may qualify.

But the editorial also seized on an important and worrying statistic: unemployment among African-American teens “runs about six times higher than the national average.”

An ill-conceived government plan may not be able to alleviate this unfortunate situation, though one certainly contributed to it.

The “Fair Minimum Wage Act” was offered as item four on the “100 Hour Agenda” presented in January 2007 by Democrats who had just assumed majority status. Congress decided to raise the federally-mandated minimum hourly wage by more than 40% in three installments over a two-year period, the last of these arriving this summer.

Bill sponsor George Miller (D-CA) said the increase was a “major concern to American society” and a matter of social and economic justice, ensuring that the nation’s poorest could provide for their children and families and “participate in the economic system.”

But according to economists quoted by the Associated Press, the minimum wage hikes “could prolong the recession” and “force small businesses to lay off the same workers that the pay hike… was meant to help,” particularly in seven states “where the pay increase coincides with double-digit unemployment.” Tennessee is one of them, with 10.5% of the workforce unemployed at last count.

The majority of those earning the minimum wage are entry-level employees, young people under the age of 25, and members of households with an average income of $49,885 (four times the minimum wage). Forty percent of them have joined the labor force within the past twelve months, and over two-thirds of them would have earned a raise within a year.

So the group that would conceivably stand to benefit most includes teenagers, recent graduates and those entering the workforce for the first time.

Unfortunately, it’s these same young people who are hurt most by the law, as the unemployment rate for 16 to 19-year-olds hit 25.9% in September, “the highest rate recorded since at least 1948,” according to Wall Street Journal reporter Sara Murray.

The full impact of the minimum wage law hasn’t been felt yet, Murray writes. “Being shut out of the labor market early in one’s career can lead to persistent, negative effects on a person’s ability to find a job and earn competitive wages for up to a decade or more.”