By Sean Whaley, Nevada News Bureau: It may be welcome news for those who have entry level jobs, but a more than 9 percent hike in the minimum wage to take effect Thursday in Nevada will have a chilling effect on hiring, particularly for teens, according to one national group.
A Nevada union official disagrees, saying the minimum wage hike isn’t to blame for the state’s record jobless rate or the high unemployment levels seen among teens in the workforce.
Nevada’s minimum wage will increase to $8.25 an hour on July 1, up from the current $7.55 an hour that took effect on July 1, 2009. For minimum wage workers who have access to qualified medical plans, the wage will be $1 less, or $7.25 an hour, up from $6.55 an hour.
The increase comes as state officials recently announced the Nevada jobless rate hit 14 percent in May, highest in the nation and the highest ever reported in the state. The state Department of Employment, Training and Rehabilitation said Nevada’s employers added 4,800 jobs in May, but most of the increase was seasonal or temporary census hiring.
The agency reported that Nevada’s youngest workers, “are bearing the brunt of the recession worse than any other age group.” At 22.8 percent, the unemployment rate for workers aged 16-24 is nearly twice the rate of other groups, the agency said in its May Economy in Brief report.
The hike in the wage is required as a result of a voter-approved state constitutional amendment in 2006 that tied Nevada’s wage to the federal minimum wage and provided for increases based on inflation. The current federal minimum wage is $7.25 an hour. The Nevada constitutional amendment requires the Nevada wage to be $1 higher.
One critic of the minimum wage hike says it has a negative effect on teen hiring.
“More than one in four teens in Nevada is looking for work without success, and it’s not just because of the recession,” said Michael Saltsman, research fellow at the Washington, DC-based Employment Policies Institute.
The institute looked only at unemployment for those aged 16 to 19 and determined the rate in Nevada was 34.6 percent as of April 2010 – the second highest in the country.
“Minimum wage mandates are keeping teens from finding a job and the coming increase in the Nevada state minimum will make it worse,” he said.
The institute cited a study from Ball State University that attributed the loss of 310,000 teen jobs to the 40 percent increase in the federal minimum wage between July 2007 and July 2009.
“It’s the least-skilled and least-experienced that are hit hardest as a result of increases in the minimum wage,” Saltsman continued. “They’re missing out on the valuable career skills that come from a first job.”
The minimum wage is well intentioned but ultimately does more harm than good, he said. Increased labor costs could lead to the permanent elimination of jobs as employers look for cheaper ways to operate, Saltsman said.
Danny Thompson, executive secretary-treasurer of the Nevada State AFL-CIO, the group that put the minimum wage measure on the ballot, said Nevada’s dismal unemployment picture is not the result of increases in the minimum wage.
“We’re totally dependent on tourism and gaming to make the wheels go round,” he said, “I think that has driven our problems here, along with the foreclosure mess.”
Thompson said putting more money into the hands of the state’s lowest income wage earners will help stimulate the economy because they will spend the additional income.
“They spend it in the economy,” he said. “Which I think right now, given our current economic conditions, is a very good thing.”
He also rejected the suggestion that the high unemployment rate among teens is due to the minimum wage. Thompson said it is the result of competition from adults for the entry level jobs.
Nevada voters supported the ballot measure because they recognized the minimum wage was not a living wage, he said.
“If it were on the ballot today I think it would pass again just as easily,” Thompson said.
Saltsman on why jobs for teens are important:
Thompson on why minimum wage hike is beneficial:
Thompson on minimum wage not the cause of teen unemployment: