Government Initiatives to Keep Young People Unemployed

The government jobs programs seem to be working --- assuming they are designed to keep young people from working for the greedy fat cats and evil businessmen.

And I'm serious about that apparent no jobs by government design stuff. At least that's often the effect of government's actions.

How crazy is it that we expect government rules and regulations to protect our youth from being exploited in the work place? How can the young folks ever be exploited, even if there were an intention to do so, if there's no demand for their services?

In other words, the economy sucks, my friends, and government is doing as much as it can to keep it sucking, albeit perhaps unintentionally.

Are any of you old enough to remember Johnny Carson's game show "Who Do You Trust?" in the late 1950s and early 1960s?  The game worked like this: you trusted either yourself or your female partner to answer the question put forth by Johnny Carson.

Now We the People have to answer the question whether we trust the government or the young people themselves, including their parents perhaps, to look after the best interests of our young folks. I know who I trust to do that job, and it's certainly not the government knows best gang.

Today many businesses that may otherwise hire the young aren't doing so because of onerous government rules, regulations and other "assistance." In plain language, the government is often keeping  businesses from hiring youthful workers, even if our young folks would like to have the job because 16% of them are unemployed, and a staggering 50% of them are underemployed. Go figure!

How to keep the young unemployed tells the tale:

"If Congress and the administration wanted to keep the young and unskilled out of work, how would they do that? It’s not hard. Indeed, recent history suggests that they know how. They would raise the minimum wage, pricing young people out of some jobs. They would require that firms pay for health care, or, failing that, pay a penalty for each uninsured employee. They would discourage unpaid internships, which are often a first rung on the career ladder. They would try to ban young people from some jobs in agriculture on family farms.

Our government has done all this, and more. . . . Here’s how it works:

Increases in minimum wage. Minimum wage increases from $5.15 per hour to $7.25 an hour over a three-year period, from 2007 to 2009, particularly affected young and low-skilled Americans.

When Social Security, workers compensation, and unemployment insurance are added to the $7.25 minimum wage, the cost to the employer is about $8 an hour. That means that employers will rationally hire only workers whose output exceeds $8 an hour. Some inexperienced young people, whom it makes sense to employ at $5.15, will not be employable at $7.25.

Health care requirements

Another way to discourage employers from hiring low-skill workers is to impose a per-worker tax. That’s exactly what the Patient Protection and Affordable Care Act of 2010 will do, beginning in 2014.

Under the act, firms with 50 or more employees will be required to offer affordable health insurance, or pay a $2,000 annual tax for each uncovered worker. Employers in the 50+ size bracket will continue to hire skilled workers — but they will diminish their compensation by the cost of health insurance. For employees paid at minimum wage, however, this will not be possible, because they may not be paid less. So, some unskilled workers won’t be hired. 

Employees of industries that have traditionally offered the greatest opportunities to entry-level workers — leisure and hospitality, and eating places — will be particularly hard-hit by the new law. The $2,000 penalty will amount to 9% of average wages in the food and beverage industry and 8 percent of wages in the retail trade. Many firms do not now offer all employees health insurance. Also, they have large percentages of entry-level workers, whose hiring will fall off.

 

Restrict free internships

How about younger workers, in their teens and early 20s, who can’t get paying jobs, but want unpaid internships, to get experience that may qualify them for a future job that pays? In order to reduce employment among these workers, the administration can make it more difficult to get an unpaid internship. . . . That’s what the Labor Department did in April, 2010. It published six new criteria for working as interns.

The internship has to be “educational” (whatever that means). It must benefit the intern, who must not displace regular staff. The employer cannot benefit from the intern’s presence. At the end of the internship, the intern is not necessarily entitled to a job. The internship will be unpaid. Read more about internship guidelines.

Compliance with these regulations is challenging. What if the student is benefiting from the internship at the beginning of the summer, and then gets bored? Must he quit? Conversely, what if he becomes so experienced that before summer is over he does useful work that benefits the employer?

Many interns perform work that benefits employers, but benefits them less per hour than the minimum wage. In this case, the smart business decision would be not to hire an intern.

This is unfortunate for high school and college students who use internships to evaluate different careers. Knowing what avenue to pursue is helpful before taking out a loan for an expensive academic degree.

 

Agriculture restrictions

The good news is that experience shows that sometimes public opinion can stop some silly rules. In August 2011, the Labor Department proposed that teens under 18 be prohibited from doing certain jobs on farms and in allied lines such as grain elevators, silos, grain bins, feed lots, and livestock exchanges and auctions. Read update to child labor regulations.

Outrage from rural communities, and some members of Congress, caused the Department to withdraw the rules last April.

We should not be surprised at the rise in youth unemployment, an increase that is altering the fabric of society. It is a tragedy that the United States prohibits those with skills worth less than $8 an hour from working. And it makes no sense for firms to be discouraged from taking on unpaid interns — useful training at a time when the press is replete with stories about mismatches of job requirements and applicants’ skills.

If young people can’t get a foot on the first rung of the career ladder, how can they get to the second? Or the third? Or, one day, the corner office?"

My Take

The law of unintended consequences is alive and well in many government enacted laws, rules and regulations.

By trying to protect the young from greedy and ill intentioned fat cat business leaders, they end up hurting those they're designed to assist. It happens all the time.

As just one example, minimum wage laws sound good but generally do great harm to those they're supposed to help.

It often works that way with extending unemployment compensation benefits as well.

And student loans. And in government contracts requiring higher than market based pay to protect the unions. And when harming consumers by protecting Florida sugar cane operations and Iowa ethanol operations.

Yes, our government does a lot of things that harm us, albeit unintentionally.

But they make for good sound bites when the programs are announced.

The idea that government is  on the job protecting our otherwise helpless young people from greedy and ill intentioned business leaders is a complete crock, but it sells!

Accordingly, short term politics continuously prevails over long term common sense and empirical evidence to the contrary. Even when it harms our young people, our economy and society as a whole.

I could go on, but I won't. Politics sucks.

Thanks. Bob.