Kansas City raises its minimum wage, but not for teens: Why it's a good idea.

Why Some Cities Should Set a Lower Minimum Wage for Teens

Why Some Cities Should Set a Lower Minimum Wage for Teens

Moneybox
A blog about business and economics.
July 20 2015 3:35 PM

Why Some Cities Should Set a Lower Minimum Wage for Teens

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A McDonald's employee of indeterminate age, with french fries.

Reuters

Last week, the Kansas City Council voted to increase its local minimum wage to $13 by 2020, handing yet another victory to labor activists who have been campaigning to lift worker pay across the country. However, the ordinance included a big exception: The new minimum won't apply to employees under 18. It's an adults-only raise.

Jordan Weissmann Jordan Weissmann

Jordan Weissmann is Slate’s senior business and economics correspondent.

As Lydia DePillis noted at Wonkblog, that move was quite controversial. Many saw it as watering down the law and worried it would hurt teens who support families or encourage employers to hire  high school–aged part-timers instead of adults.

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But overall, this strikes me as a smart compromise—a way to ensure that older workers with children earn something close to a living wage while shielding the people most likely to suffer the potential downside of a high minimum. And it's something other cities that want to drastically boost their pay floor might want to consider.

Kansas City isn't the first place to adopt a lower minimum wage for minors. Australia has such a policy, for instance, as does South Dakota. U.S. federal law, meanwhile, lets employers pay workers just $4.25 an hour during their first 90 days on the job if they're under the age of 20. The logic behind these rules is fairly straightforward. While economists disagree on whether and to what extent the minimum wage makes it harder to find jobs, teens—especially black and Latino teens, who already face challenges getting a foothold in the labor market—are the ones most likely to be hurt by an increase. First, they work disproportionately in the industries, like fast food and retail, that rely most on minimum-wage labor. Second, the more employers have to pay their staff, the more incentive they have to hire older workers they don't have to worry about training and who, frankly, might be a little more reliable. Creating a two-tier minimum helps address those issues.

Could that nudge businesses to hire a few more 11th-graders instead of adults who are trying to support their families? It's possible. But unless you think we should be actively pushing teens out of the labor force, it's also worth weighing the chance that a high minimum will end up denying young people some crucial early years of job experience. The bigger the increase, the more that becomes a concern, and the more prudent it may be to let employers pay teens a little less.

In Kansas City, the caution especially makes sense. The council's ordinance will raise the minimum to $13 from a mere $7.65. Even assuming local earnings rise fast in the next several years (say, by 4 percent annually until 2020) that will still leave the pay floor at about 60 percent of the metro area's median wage—which is a lot by both historical and international standards. It's a large enough hike that the minimum wage literature, which tends to look at comparatively small increases, can't really tell us a great deal about what the effects will be. In other words, even if you don't believe raising the minimum typically kills jobs, you'd at least want to worry a little bit about the possibility, and make some concessions to protect the most vulnerable. Kansas City did. Other cities might want to take note.