Youth unemployment and minimum wages

Author(s): THOMAS W. GAVETT

Source: Monthly Labor Review, Vol. 93, No. 3 (MARCH 1970), pp. 3-12
Stable URL: https://www.jstor.org/stable/41837921
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 New BLS study
examines employment effects
Youth
of past minimum wage changes
and possible effects of a
unemployment
lower rate for teenagers and minimum
THOMAS W. GAVETT
wages

Over the past 20 years, unemployment amongWhile school takes some teenagers out of the
youths age 16-19 has been higher than that forlabor market, an increasing proportion of those
adults. Since 1948, teenage 1 unemployment rates enrolled in school are also in the labor market
have varied from a low of 7.6 percent in the last seeking jobs - jobs that fit in with the require-
year of the Korean War (1953) to a high of 17.2 ments oí school attendance with respect to
percent in 1963. By contrast, the unemployment location, hours, and so on.
rate for adults over age 24 ranged from a low of The movement of families from farm to city
2.3 percent in 1968 to 5.6 percent in 1958. and the decline in farm employment has also
As might be expected, there is a similarity meant that a smaller proportion of teenagers
between fluctuations in the unemployment rates are employed in agriculture - a decrease from
for teenagers and for adults, because general 18 percent in 1948 to 7 percent last year. Many
business conditions affect the employment of all teenagers had been employed on family farms;
groups within the population. Yet the unemploy- now they must compete in the urban labor market.
ment rate of teenagers has, in the 1960's, increasedPotentially compounding all these developments
relative to the rate for adults. has been the effect of the military draft and its
Although, between the recession of the early attendant uncertainties.
1960's and the full employment of the last few Another development of major significance to
years, the unemployment rate for both adults policymakers is the Federal minimum wage.
and teenagers has decreased, the relative decline According to economic theory, a wage set higher
was much smaller for teenagers than for adults. than the rate normally prevailing in the market
The adult rate dropped almost 5 percent in the will mean that some workers will not be able to
first 4 years of the decade to 2.5 percent in the find jobs. Probably those workers who are less
last 3 years; for teenagers, from about 16 percent productive - either because they are untrained
to 13 percent. Thus, from 1948 to 1962, the teen- or inexperienced or have inadequate tools to work
age rate was 3 times the adult rate; but in the with - will have special employment problems.
last few years it was 5 times as high (table 1). A legal minimum wage might, therefore, help
Many developments of the last 20 years explain the unemployment problems of some
could have contributed to the persistently high teenager«.
rates of unemployment for teenagers and the In 1950 the Federal minimum wage under the
increase relative to adults in the 1960's. A sub- Fair Labor Standards Act (flsa) was 75 cents an
stantial growth in the size of the teenage popula-hour. In the years following, the minimum was
tion relative to adults - from about 9 percent raised until, at the end of 1969, it stood at $1.60
in the mid-1950,s to 13 percent in the last few for most workers covered by the law.2 Of course,
years - has compounded problems of job place- prevailing market wages have been increasing
ment. The proportion of teenagers enrolled inat the same time. Relative to average hourly
school has increased from 50 to 70 percent. earnings, the minimum wage in 1968, as indicated
in chart 1, was not much different from its relative
This is the summary chapter of Youth Unemployment level in 1950. (See table 2.)
and Minimum Wages , a Bureau of Labor Statistics study Perhaps more significant have been the expan-
prepared under the direction of Thomas W. Gavett, sions of coverage under flsa into the retail trade
Assistant Commissioner for Wages and Industrial Rela-
and service sectors in the 1960's. Trade and service
tions. The full study is being published as BLS Bulletin
1657. industries employ disproportionately large num-
3

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4 MONTHLY LABOR REVIEW, MARCH 1970

Table 1. Teenage unemployment

bers of teenagers. Further, there rates are and ratios
many low
wage sectors in those two Unemployment
industry rates, 16- to Ratio ofdivisions.
unemployment rates, I
19-year-olds 16 to 19 years, to rate for 25
1968, for example, average hourly earnings
years and over wer
$2.16 in retail trade compared with $3.01 in manu Year

Total White All others Total White All others

facturing and $2.85 for the private nonfarm
economy. (See chart 2.)
1948 9.2 8.9 11.2 3.17 3.30 2.49
In examining past relationships between mini- 1949

1950.......

mum wages and the high unemployment rate 1951

1952

of youth, certain general questions must be 1953

1954

investigated: (1) Have changes in the level o 1955

1956

minimum wages and coverage of minimum wag 1957....;..

1958

laws contributed to the problem of youth unem 1959

1960

ployment? (2) Do employers avoid hiring teenager 1961

1962

because the wage that must be paid them is no 1963

1964
1965disadvantages
low enough to offset the 14.8 13.4 26.5 4.63 4.62
of 4.49
inexperi
i966i::i:
ence or lack of maturity, or are other reason
1968 .... 12.7 11.0 24.9 5.52 5.24 6.23
1967

more important in inhibiting their employment?

(3) Do teenagers expect wages
Note: soseehigh
For more detail, chapter 1. that min
mum wage rates are irrelevant or are their expecta
through a more
tions high due to the minimum wage? extended period
used annual
In addition to questions data.
concerning past experi-
ence, two others require examination
These analyses concluded that it: was
(4)not Regard-
possible
less of whether or not to
theadequately
legalseparate out the effects of minimum
minimum wage ha
significantly contributed
wage changes
to thefrom other
problem
developments. Aofdemon-
yout
unemployment, would strable
a relationship
differential exists betweenminimum
minimum
wage for youth reduce wages
that and youth
problem unemployment
in rates
the if other
future
variables are
(5) Would any significant excluded from the analysis,
problems but when
be caused b
othersuch
a youth differential, variables such
as asreduced
population and school
famil
incomes or a shift in the incidence of unemploy
ment from teenagers to other groups?
Chart 1. Fluctuations in adult and teenage unemploy-
ment rates, 1948-68
The evidence from time series

Studies of the relationship between minimum

wages and teenage unemployment rates completed
over the past several years have not arrived at a
uniform set of conclusions. The econometric
analysis undertaken for this report used several
approaches to analyze data. Basically, quarterly
data for 1954 through 1968 were examined for
different sex-color-age groups within the teenage
population. Variations in the proportion of teen-
agers employed and the proportion unemployed
were compared with variations in the minimum
wage, controlling other relevant variables. These
variables included the adult unemployment rate,
the proportion of teenagers employed in agricul-
ture, the relative size of the teenage population,
the school enrollment rate, and the relative size
of the Armed Forces. A similar analysis of the
employment experience of teenagers as a whole

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YOUTH UNEMPLOYMENT AND MINIMUM WAGES 5

Chart
enrollment changes are taken into2. Cov
account, th
in minimum
effect of changes in the minimum wage 194
earnings, upon
teenage unemployment becomes obscure.
The study indicated that extensions of cover-
age of the minimum wage had more of an effect
than changes in the relative level of the minimum
wage; that Federal manpower programs which
produce employment for teenagers may have offset
to some degree, the disemployment effects o
minimum wage legislation; and that minimum
wage legislation may have had greater adverse
effects upon 16- and 17-year-old than upon 18
and 19-year-old youths.
The analysis concluded on the cautious note
that, "While there are hints of adverse effects of
minimum wages in available data, no firm state
ments can be made about the magnitude of suc
effects."
Another survey undertaken for this report
differs significantly in approach from othe
recent studies. It traces the employment
experience of an identical group of young males,
15 to 25 years of age, during a time when the
Federal minimum wage was increased from $1.25 for older
in 1966 to $1.40 in 1967 and coverage was ex- results.

panded significantly. For the teenagers, as well as Those teen

in 1966 we
minimum. I
Table 2. Proportion of earnings covered by the Federal it would be
minimum wage ployed or m
Basic minimum wage Minimum
by the low
as a percent of Minimum wages as a pectation, t
Basic percent of average hour- of weeks lo
minimum average hour- ly earnings
wage Total ly earnings weighted by only decline
Year effective Average compensa- weighted by industry teen-
atend hourly tion per industry total ageemploy- more than
ofyear earnings, man-hour, employment ment and
private private and proportion proportion of other hand
nonfarm nonfarm covered, pri- total employ-
vate nonfarm ment covered, out of the l
private nonfarm
high wage
1947
expectation
Looking a
1948

1949

employed d
1950

1951...

proportion
1952

1953

were out of
1954

1955

the propor
1956

1957

unemployed
1958..

1959

about the s
1960

1961

below the p
1962

1963..

were unemp
1964

1965...

The analy
1966

1967

against find
1968

Note : For explanations, the sample

see
table 1.6

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6 MONTHLY LABOR REVIEW, MARCH 1970

decisions
periods, thus increasing to employ te
the employability o
group; further, the restrictions on employ
data tell nothing about
ardous
entering the labor force for occupations.
the first timeC
this period. There was
experience some evidence under State of a
employment effects stresses among
hazardous work restrictions
15- asto well as17-ye
restrictions on hours
students who were Negroes and of work,
had the cumbersome
limited
market information and
machinery among
of work those
certificates, union restrictions,stu
employed as service and
workers. There
problems of transportation was,
as factors how
curbing
the employment
no evidence of a general tendency of teenagers.
forThe uncertainty
the min
wage increase of 1967 to create
of the military relatively
draft was the reason most fre-
unemployment among quently cited
low by employers
wagein youngweighing their wo
decision to hire
As the analysis concludes, 18- and
"If 19-year-olds,
the minimum a problem
increases did indeed underscored
createin unemployment
the study of experience in local am
youth, the effect was
public not a pronounced
employment offices in 23 areas (chapter one.
5) .
The belief that teenagers are unwilling to work
The employers' for low wages is not uncommon among employers
response
(see further discussion below). The extent to
which the legal authority
In the survey of employer to pay a wage standar
hiring lower
10 cities, included than
in the chapter
minimum would offset4, theis most
such problems
uncertain.
quently cited consideration affecting emp

About BLS Bulletin 1657

Youth Unemployment and Minimum Wages, to inbe

placing teenage workers (Irvin F. Wingeard).
published this spring, will be available for purchase
6. Wage Expectations compares wages expected by
from the Bureau's regional offices or from the Super-
unemployed teenagers and wages actually earned by
intendent of Documents, U.S. Government Printing employed teenagers (Harvey R. Hamel, Melvin
Office, Washington, D.C. 20402. Goldberg, Thomas W. Gavett).
Following is a list of chapters and of persons pri-
7. Teenage Earnings and Family Income analyzes
marily responsible for preparing them : the importance of teenager earnings to family income
(Thomas W. Gavett).
1. Introduction reviews the changes in labor force
8. Study of Full-Time Student and Learner Certifi-
experience of youth and in the minimum wage cation
in Program Under the Fair Labor Standards Act
the postwar period and provides the analytic frame-
reports the history and development of the certifica-
work for the study (Thomas W. Gavett). tion program and analyze the results of a special
2. Experience of the Past: The National Minimum
survey of the reasons why employers did not fully
provides econometric analyses of relationships be-
use their authority to hire students and learners at
tween the employment and unemployment experiencespecial below-minimum wage rates (Clara F. Schloss).
of teenagers and changes in the minimum wage9. State Experience With Minimum Wage Diff-
(Hyman B. Kaitz). erential Rates for Youth and Their Effect on Youth
3. Effects of Changes in the Federal Minimum Employment describes experience under State mini-
Wage on Employment of Young Men , 1966-67 tracesmum wage laws that have differential minimums for
changes in the employment experience of young menyouth (Juliet F. Kidney).
in a national sample during a time when the minimum 10. Youth Wage Rate Schemes in Western Europe
rate rose and coverage was expanded (Karl Egge, and Canada and Their Effect on Youth Unemployment
Andrew I. Kohen, John R. Shea, Fred A. Zeller). reviews the relevance to the United States of foreign
4. Survey of Hiring Requirements and Youth Em-experience (John W. Piercey).
ployment studies changes between 1966 and 1969, in 11. Youth Employment and Wages in Postwar
10 cities, in employer hiring standards and attitudesJapan reports on reasons for the high rates of overall
toward hiring teenagers (Norman J. Samuels). employment and intense demand for new school
5. Employment Service Local Office Experience ingraduates, along with low wages for youth (Solomon
Serving Teenagers describes various obstacles en- B. Levine, Gerald G. Somers).
countered by public employment offices in 23 areas 12. Summary and conclusions .

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 YOUTH UNEMPLOYMENT AND MINIMUM WAGES 7

Table 3. Change in labor force status, 1966-1967, men full-time student certificates have the legal
15-19 years of age with work experience in 1966
authority to hire youth at 85 percent of the mini-
Total Disem- Disem- mum wage. As reported in the study of utilization
number Change Total ploy- ploy-
with Change in mean number ment ment of that authority (chapter 8), only 10 percent
work in mean weeks employ- rate rate
Hourly rate of pay experi- weeks out of ed in (into (out of used the certificate authority fully, and 55 percent
(dollars) in 1966 enee in unem- labor 1966 unem- labor
1966 ployed1 force2 survey ploy- force)4 used less than half of their authorized man-hours.
(thou- (weeks) (weeks) week ment)3 (per-
sands) (thou- (per- cent) Seventeen percent of the establishments holding
sands) cent)
such certificates claimed they had not fully used
Total or average s... 5,854 -1.9 -4.1 3,311 6.5 19.3 it because students were unsatisfactory workers
Less than $1.00 (table 4). Apparently for some employers at least
$1.00-1.39

$1.40 or more a 15-percent "discount" was not enough to offset

the poorer quality of student help.
1 Mean number of weeks unemployed during the 12 m
survey minus the mean number of weeks unemployed duri All this does not mean that wages - and the
the 1966 survey.
2 Mean number of weeks out of the labor force during the legal minimum wage in particular - are ever ir-
1967 survey minus the mean number of weeks out of the l
months preceding the 1966 survey. relevant. Although local employment service
3 Proportion of those employed during the 1966 survey w
during the 1967 survey week. offices generally said minimum wages were not an
4 Proportion of those employed during the 1966 survey w
labor force during the 1967 survey week. important reason for the difficulty in placing teen-
« Total includes young men not classified by wage rate.
Note: For further discussion, agers see
in full-time
chapterjobs, minimum
3. wages were
cited as a problem more frequently in the case of
Among the small number
16- to 17-year-olds (table 5). The minimumof wage es
which raised age or
was the second educational
most common reason for employers
ments between 1966 and 1969 in the 10-cities raising hiring standards between 1966 and 1969,
though such companies represented less than 5
survey of hiring standards, the reason most fre-
percent of all employers in every city covered and
quently cited by employers for doing so was higher
less than 1 percent in most cities. The relatively
costs of training and hiring teenagers. Experience
under State laws and experience of the publictight labor market for adults in the last 3 years,
however, probably kept most employers from
employment offices also indicate lack of education
and training to be an important reason forraisingem- their hiring standards. A minority of
ployers not hiring teenagers for full-timeemployers
jobs. covered in the survey of hiring stand-
Dissatisfaction with teenagers' absenteeism,ards un-did consider the minimum wage an important
factor affecting their decision to hire teenagers
reliability, and performance on the job is common.
In principle, the lower quality of teenage (table
labor 6) . Employers located in small towns cited
the
could be offset, in the employer's calculations, byminimum wage more frequently than em-
paying them a lower wage. However, underployers the located in large cities and more frequently
Fair Labor Standards Act, establishments holding
with reference to 16- to 17-year-olds than 18- to 19-

Table 4. Numerical distribution of establishments not utilizing or not fully utilizing full-time student certificates by
degree of utilization and reasons for less than full utilization of certificates
[Data relate to certificates in effect on April 30, 1969, and reflect utilization during the period May 1, 1968, to April 30, 19691

Reasons for not utilizing or not fully utilizing certificates

Num-
ber of
Num- estab- Full-
ber of lish- time Delay
estab- ments stu- Full- Com- Tempo- in
Degree of utilization lish- not Certifi- dents time Prefer pany rary Selfim- school
ments utilizing Fully cate Record- unwill- stu- to hire policy Legal opera- posed verif
with or not staffed restric- keep- ing to dents regular to pay restric- tional restric- cation
certifi- fully tions ing work at unsatis- workers mini- tions prob- tions stu- tions
cates utilizing sub- factory mum lems dent
certifi- mini- workers wages status
cates mum
wages

Total

Less than 20 percent

20 percent to 49 percent... 1,085 1,085 641 198 212 211 236 151 98 114 82 78 50 36 12
50 percent or more

Note: For further discussion, see chapter 8.

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 8 MONTHLY LABOR REVIEW, MARCH 1970

Table 5. Rank importance off reasons ffor difficulty in

However, a 1967 survey of young men throughout
placing teenagers based on local offffice experience during
fiscal year 1969, average, all areas the Nation indicated that the average wage ex-
(Rating Scale: Very important = 3; Important = 2; Unimportant, irrelevant, or not pected by unemployed teenagers was less than the
true = 1)
average wage actually earned by those who were
Full-time jobs Part-time jobs employed (table 7). Further, large numbers of
teenagers, both unemployed and out of the labor
Reason

16-17 18-19 16-17 18-19

years years years years force, did indicate they would accept jobs at less
than the $1.40 legal minimum in 1967.
1. Level of the minimum wage has caused
employers to seek older, more experi- Findings from the Urban Employment Survey
(ues)teenagers
, a survey of residents of selected
to poverty
enced workers for jobs

2. Unwillingness of accept
wages usually offered for jobs they are
qualified to take areas of six large cities, suggest that average earn-
3. Uncertainty over the draft makes em-
ployers reluctant to hire teenagers ings expectations of currently unemployed teen-
4. Legal restrictions on hours of work,
hazardous work, or other working con- agers did not exceed average hourly earnings
actually received by employed teenagers. In the
ditions for teenagers

5. Hiring specifications of employers with

respect to education and experience
July
are so high that most teenagers 1968-June 1969 survey
areperiod, the median
wage expected by unemployed teenage boys and
excluded

6. Employers' hi
respect to age
girlswork-
exclude

7. Employer fear of higher cost of was less than the wage actually received by
teenagers

man's compensation and other insur-

ance when teenagers are employed
those employed.
8. Employers believe teenagers are not
reliable
The reported proportion of unemployed young
9. High labor turnover among teenagers

10. State laws require too much paper work, men willing to accept employment in 1967 at
such as work permits

11. High cost of hiring and training teenagers. 1.65 1.58 1.57 1.41 wages below the Federal minimum was less, how-
12. Union contract provisions
ever, than the proportion of teenagers actually
employed at lower wages. The same was true of
teenagers, especially the males, in the Chicago and
year-olds. Further, emplo
New York poverty areas in 1968-69. These bits of
employment offices - cited
evidence lend some support to the supposition
an important factor more
that the unemployment of some teenagers can be
of younger teenagers. A
attributed to high wage expectations.
establishments did apply f
The average duration of unemployment for
learner certificates unde
teenagers is short. While this is partially attribut-
than half the authorized ti
able to their ability to withdraw from the labor
The evidence suggests, the
force, it suggests also that high wage or status ex-
ployers would be willing to
pectations of teenagers are not enduring.
lower wage rates. However,
employment of youth and
quality of teenagers
Table 6. Percentage off establishments covered by FLSA as e
even more important
reporting the minimum wage as a factor in the decisionimpe
ment of to hire teenagers, by city and age group
youth.
Under 18 18 and 19
Expectations of youth
City
Very Impor- Not Very Impor- Not
Throughout the Nation,
impor- tant impor- impor- tant impor-
tant tant tant tant
among employers and othe
ers expect unduly high w Atlanta

to accept low status (fre

Detroit

Cleveland

Baltimore

wage) jobs. Close to 20 per Milwaukee

holding full-time student

Los Angeles
Battle Creek

Auburn

claimed they did not fully Galveston

cause students were unwill

El Paso

Unweighted aver
mum rates. Certainly th 6 large areas....

material on the alleged

4 small areas

teenagers. Note: For further discussio

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 YOUTH UNEMPLOYMENT AND MINIMUM WAGES 9

Table 7. Rate of pay required to induce youth to accept ers at rates below the minimum does not auto-
employment or to enter labor force, and hourly rate of
pay for those employed, by age and color, 1967 matically mean the opportunity will or can be
fully used by employers to increase employment of
Age and 1967 labor Total Less $1.40 $2.00 $3.00 Mean pay
force status number than to to or required youth; the modest abatement of rates provided in
(thousands) $1.40 $1.99 $2.99 more or earned
those programs was, by itself, inadequate. The
Whites full-time student certification rates were less mean-
Age 15-17: ingful in the South where wage levels are generally
low, the student rate thus providing a smaller
Out of labor force

Unemployed

incentive to hire youth.

Employed.

Age 18-19:
Differential rates in State minimum wage laws -
Out of labor force

Unemployed

Employed

commonly 80 percent of the adult rate - have had

All limited effects on unemployment rates. State laws
others

Age 15-17: are not relevant where the Federal law applies if
Out of

Unemployed
labor force
the State minimum is below the Federal. In a num-
Employed

Age 18-19: ber of States, small establishments and certain

occupations where teenagers are employed are ex-
Out of labor force

Unemployed
Employed
empt from State law. Further, entry wage rates in
Note: For further discussion,
some areas are far above the State minimums.
see chapter 6. Dashes indicat
Over 40 percent of the local employment service
offices
The available evidencebelieved employers would hire appreciably
indicates
are knowledgeable about ifprevai
more 16- and 17-year-old teenagers it were pos-
and adjust their sible expectations
to pay less than the Federal minimum, but
acco
ences in levels between areas and overtime. There only 26 percent of the offices believed this would
is some evidence that unemployed teenagers are be true of 18- and 19-year-olds. About 90 percent
of those offices which believed it would make a
disinclined to accept the lower wage jobs. Mini-
mum wages may be a factor influencing these ex- difference, thought the reduction in the minimum
pectations. These expectations contribute, at leastwage that would be necessary would not exceed
40 cents.
in the short run, to unemployment problems, but
do not appear to be a major obstacle to reducingThe studies of the certification program, State
teenage unemployment. experience, and the survey of local employment
offices suggest that if a youth differential is to be
meaningful, it would need to be a fairly substan-
A youth differential
tial differential - perhaps at least 20 percent below
Whether or not the minimum wage has beenthe
a adult rate - and that the relationship of the
significant factor in causing youth unemployment, adult minimum to average wage levels could not be
the question of the effects of a youth differentialfar is below the historic ratio.
a different issue. There has been only limited expe-The evidence from abroad indicates that low
rience with these differentials in the United States. wages for youth are an inducement to employers
They currently exist in Federal minimum wage to seek young workers eagerly. The relatively low
legislation in the form of the certification programs youth unemployment rates abroad (table 8) are
under flsa and also in a variety of forms in State partially a reflection of the fact of low wages for
laws. In other countries - in Western Europe, youth. In the United Kingdom, the Netherlands,
Canada, and Japan (chapters 10 and 11) - youth and Japan, young workers start work at about one-
differentials exist by law, contract, or custom to a third the adult rate. In the United States in 1967,
much greater extent than in the United States. 15- to 17-year-old boys received a wage which
The certification programs cover a limited num- averaged about 70 percent of the average wage
ber of workers and establishments. Employer in- paid those 20 to 25 years old. Much of this differ-
terest in the certification programs has increased ence reflects a different mix of jobs and job status
at times of minimum wage law changes, though in the two age groups.
trend data on issuance of certificates do not neces- One element of the Japanese experience - low
sarily measure usage. The study of these programswages for youth - cannot be divorced from other
points out that the authority to hire young work-parts of Japanese institutions. For example, the

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 10 MONTHLY LABOR REVIEW, MARCH 1970

Table 8. Unemployment rates and the youth-adult

unemployment ratio for selected countries the United States has a limited application to
American teenagers who are much less likely to be
Adult unemploy- Youth unemploy- Youth-adult
ment rate ment rate unemployment
looking for a "permanent" job.
Countries (15-19 years) ratio 1 The employment advantage of a youth differen-
1960-64 1967-68 1960-64 1967-68 1960-64 1967-68
tial would be restricted by the fact that many
teenagers are available for only part-time employ-
Germany

Canada
(1%

(1962-66)
1-67)

2
ment and have a limited geographic mobility. It
Netherlands (1960)

United Kingdom (1961-67). 31.3 s 2.0 3 0.9 3 2. 2 3 0.6 3 i. i

would also be restricted by American wage-setting
Sweden (1964-67)
*1.1
institutions which emphasize a wage for a job, not
France

Belgium
(1960)

(1960).
an age-wage relationship, and further limited by
Italy (1961-67) legal restrictions on the employment of youth.
United States (1960-68)... 5.5 3.6 H4.7 s 12. 7 3.3 5.5
Japan (1962)«

The effects of differential rates

1 Ratio of y
over.

The analysis of the relationship between teenage

2 Ostry, Sylvia, UnnnploymMt in Canada, 1961, males only, ratio: youth-all ages.
3 Labor Ministry data from unemployment insurance records.
4 Census data for April 1961. earnings and family income (chapter 7) points out
5 Youth unemployment data relate to 16- to 19-year-olds.
that very few teenagers contribute a significant
« Levine and Somers, Youth Empitymwt and Wages in Ptstwar Japan. Ratio: youth-all
ages.
share of family income. Since 73 percent of the
nenkõ system with its virtual lifetime guarantee of teenagers who worked in 1966 earned less than
employment within the firm and high wages in $1,000 per year, their low earnings are more
later years offsets low wages in youth. affected by the number of hours of work they find
Low wage rates for youth in Europe cannot be than by the wage rate. Wages paid teenagers are,
separated from the extensive apprenticeship pro- of course, not solely dependent on the minimum
wage.
grams in Britain, Germany, and the Netherlands.
These programs help to channel children from Reports from abroad do not indicate that adult
school to work. Moreover, the nenkõ system in employment has been affected adversely by lower
Japan and the apprenticeship system in Europe minimum rates for teenagers. However, the Euro-
are undergoing change, or at least attack, with pean countries and J apan have had very low over-
possible ramifications for youth differentials in all levels of unemployment. Thus, experience
those countries. abroad does not provide a clear test of the effects
In the Soviet Union, young workers by law have of introducing a system of youth differentials. Past
a shorter workday, a longer annual vacation, and experience in the United States is no sure guide,
higher wage rates than adults doing the same type since differential rates for youth have been used
of work - just the opposite of experience in western to only a limited extent.
Youth differentials are common in most State
Europe and Japan. The 16- and 17-year-old works
7 hours a day and 5 days a week; 15-year-old ap- laws with no apparent evidence of adverse effects.
prentices work 5 hours a day. The young worker State minimum wage levels are not, however, al-
gets the same daily or monthly basic pay that an ways meaningful relative to prevailing wage levels.
adult gets for working 8 hours a day at the same About 40 percent of the local employment service
offices believed that a lower Federal minimum
type of work. There have been reports in the Soviet
press that many managers of establishments have wage for teenagers would have adverse effects on
been reluctant to hire young workers because of employment of other groups; this was, however,
the extra cost involved. To combat this practice only an informed judgment. Available materials
by employers, a joint party-government decree of do not permit any firm conclusions about adverse
February 2, 1966, established quotas of jobs for effects of a youth differential minimum wage.
youth, the size of the quotas varying among Conclusions
branches of the national economy.4
In the United States, the overwhelming propor- 1. Increases in the level and coverage of the Fed-
tion of teenagers belong to a part-time, part-year eral minimum wage may have contributed to the
labor force. Almost three-fourths of the teenagers employment problems of teenagers, but it is
are enrolled in school. Experience in foreign coun- difficult to disentangle such effects from numerous
tries having institutions different from those in other influences.

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 YOUTH UNEMPLOYMENT AND MINIMUM WAGES 11

any tendency
Prior to the 1960's, relatively fewfor the spread between lower
teenagers wereand
employed in establishmentshigher rates covered
to increase has by theexcept
been offset, Fair
Labor Standards Act. Priorin the shortrun.
to 1966, agriculture
Not all sectors
(where teenagers are employed as of the economy
family have been
workers)
covered byservice
was totally exempt; domestic flsa; other labor marketis.
still institutions,
Serv-
ices and trade were generally excluded
including union from
contracts, have also the
affected wage
levels and now
law prior to 1961, and even wage rigidity.
small Unlike establish-
Britain, France,
or Japan, American
ments are exempt. The longrun risewage-setting
in the institutions
unem- have
ployment rate of teenagers relative
generally developed to
the practice that
of setting of
a wage
ratesince
adults - especially marked for a job regardless
1962 - of appears
who holds the to job.
have been associated with In other many
countries a factors.
young clerk, forCom- example,
pounding problems have may receive less
been the thanincrease
an adult doing the in same
the
relative size of the teenage work in the same company simply the
population, because he
in- is
crease in the proportion young, of but youth enrolled
this has not been the practice inin the
school, and the shift of employment United States. Rather, any wage of
out differences
agri-
culture. Although neither associated
of the with latter
age are usually
two attributable
factors to
may explain much of the youngrelative
people holding different
rise typesin of jobs than
teenage
unemployment, they do adults. mean Longevity
that or seniority increases are less
one easy-access
labor market, namely, the important
family than occupational
farm,wage is differentials;
available
to a smaller proportion of further,
youth longevity
and increases
that arethe
a function
typesof
of employment sought by length of service on a particular
teenagers (outside job, notschool
chrono-
hours) cover a restricted logicalrange
age per se . Aof existing
company's em-
demand for workers
ployment opportunities. The increase in the num- to do a particular job within the company is
ber of teenagers in school has, on the other hand,limited. Except to the degree that almost all
taken some of them out of the labor force. persons holding a particular job in a company
The magnitude of the employment effects of are teenagers, the nature of American wage-
minimum wage legislation probably has been setting institutions would reduce (but not elimi-
small, as the studies included in this report nate) the possibility of a relative decline in wages
underline, and, consequently, difficult to measurepaid teenagers even if there were no minimum
precisely. It should be kept in mind, however,wage legislation.
that (1) many teenagers have, until very recent A cautionary note should be added. If the
years, been employed in sectors of the economyminimum wage as a percent of average hourly
not covered by flsa, (2) minimum wage levels earnings was more than the 50-percent range
have not been markedly high relative to prevailing prevailing in the postwar period or if coverage
wage levels, judging by historical ratios, and (3)was extended to new areas, past experience would
the importance of minimum wages, in the periodsnot serve as an accurate guide to future employ-
between Congressional action, has been partiallyment effects.
offset by increases in money wages, tending to 2. Employer attitudes - as reflected in both
make any disemployment effects a shortrun the survey of employers and the response of the
phenomenon. Also, as the econometric studypublic employment offices - experience under the
included in this report points out, adverse employ- certification programs, and experience in other
ment effects of the minimum wage may have been, countries suggest that a substantial differential
in recent years, offset by Federal manpowerbetween youth and adult rates would increase the
programs.
employment of teenagers. The incentive of a large
The high unemployment rates of teenagers
differential would help to overcome the appre-
have not brought about a drop in the relative
hensions employers have indicated over the quality
wage paid teenagers and, hence, an increase in
their employment opportunities. Certainly, a of teenagers as employees. The evidence indicates
legal minimum wage, on its face, means wages the differential would especially affect the decisions
are inflexible downward. Because minimum wages of employers to hire 16- and 17-year-old teenagers
have been periodically increased to maintain about and particularly employers located outside the large
the same level of parity with average earnings, urban centers. The effect of a youth differential

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12

would depend on the size this

activity, of the dif
slow
the youth and adult
help minimums,
ease problemsth
adult minimum employed
to thelabor force. □
current
earnings of rank-and-file worke
plicity of the regulations. Even the
the differential would be restricte
1 Through
unique to the American
and scene.
"you
If a youth differential
Unless were
othins
1970's, it would be difficult to eva
year-olds.
without better data,
2 See chart 2 and tableespecially
2 for some additional detail. fre
tions of wages of 3 Moreworkers
sophisticated statements of tests
in and further
the A
data can be found in chapter 3. If columns
along with demographic informat2 and 3 of
table 3
ers. The effects of a youthare added, the expected adverse pattern diffe
appears. This is not true, however, when data are con-
separated fromtrolled other developme
by school enrollment status. See table 3.6 in
coming decade,chapter the
3. teenage pop
crease 12 percent, compared
4 Sovetskie profsoyuzy [Soviet Trade Unions], No. 12wit
the 1960's. Assuming
(June 1967), p. 47. no major dec

Resolving community disputes

A proposal by Theodore W. Kheel, published in the Monthly Labor Review

(January 1969), has led to the creation of two new organizations designed to
apply the techniques of collective bargaining to the resolution of community
conflicts.
The two new organizations, established under a grant from the Ford
Foundation, are:
The Board of Mediation for Community Disputes . This board "will seek to
aid community groups resolve their differences with each other and with
public agencies. It will help develop bargaining relationships and make avail-
able techniques of conflict resolution to community groups which are divided
over issues of education, housing, welfare, poverty, model cities, and other
areas of public concern."
The Center for Conflict Resolution. "The center will offer training courses
in community negotiations, mediation, and public employment dispute
settlement. It will also sponsor research and case studies in the field of com-
munity and racial conflict."
The Center will operate under the auspices of the Institute for Collective
Bargaining and Group Relations.
Both the Board of Mediation and the Center for Conflict Resolution have
their headquarters in Automation House, 49 East 68th Street, New York,
N.Y. 10021.

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