This toasty summer, ideal for hanging out at the nearest beach or swimming pool, has been anything but idyllic for young people who need money and work experience rather than a long stretch of idle days.
Too bad for them if they do. Low-skilled, inexperienced young workers, those who have the greatest difficulty reaching the first rung of a career ladder, are roadkill on our country’s misguided route to what some people consider economic justice.
As soon as Democrats regained their congressional majorities in 2007, they rushed to give low-wage workers a fairer deal by boosting the federal minimum wage from $5.15 to $7.25. The final portion of the increase was phased in last summer.
There was plenty of rhetoric about the law’s benefits for low-income workers. “This is the day for the people who empty the bed pans, change the bed linens, sweep the floors and do the hardest work of America,” Rep. Rob Andrews, D-N.J., proclaimed when the House approved the measure.
Congress was warned that raising the wages of entry-level workers was not going to raise the value of the work they do. Low-skill jobs disappear as soon as the required wage (plus Social Security, unemployment insurance and other often-overlooked payroll costs borne by employers) exceeds the value of the work. The National Restaurant Association reminded lawmakers in 2007 that the previous minimum wage increase, a decade earlier, had cost 146,000 jobs in the restaurant industry alone.
Lawmakers also were well aware that most minimum-wage workers are not primary household breadwinners. They tend to be youths, retirees, part-timers and people seeking to enter or re-enter the workforce after suffering a disability. Economists have long urged Congress to set a lower minimum wage, or even offer an exemption, to let such individuals find low-value jobs that can provide critical work experience.
But Democrats, who campaigned hard on the minimum wage issue when they captured the Senate and the House of Representatives in 2006, brushed aside the warnings and attached the minimum wage boost to a funding measure for the Iraq war. This helped the bill hold enough Republican support to get through the Senate, and it guarded against a veto by then-President George W. Bush.
Many states have even higher minimums. In Washington workers are required to receive $8.55 an hour.
Those who “do the hardest work of America” should now be enjoying the full benefit they were promised when the minimum wage was increased. But, as foretold, many of the would-be workers are now making $0 an hour instead of the old minimum of $5.15.
In April, as young people scrambled to find jobs for this summer, the unemployment rate for workers between the ages of 16 and 24 hit a record high of 19.6 percent. The rate for 16- to 17-year-olds, who are least likely to have relevant job experience, was even worse.
Not all young people are affected by the minimum wage. At our firm, even summer interns and associates earn $12 to $16 an hour, but these are students who attend elite schools and have highly developed skills. They are also fortunate, because we have an old-fashioned philosophy of expecting real, productive work from our summer help, and of paying them a fair market rate in return.
Some youths who cannot find paying work for the summer might ordinarily seek unpaid internships, which at least can help make them better qualified for future job searches. But, this summer, the would-be summer interns also ran afoul of government efforts to “help.”
Federal and state regulators are clamping down on unpaid internships, arguing that, in many cases, the positions are simply ingenious ways to skirt wage laws and exploit young people for free labor. In April the Obama administration issued new guidelines to help companies determine whether their unpaid internship programs violate the Fair Labor Standards Act.
The answer, according to the newly aggressive regulators, is almost always yes. “If you’re a for-profit employer or you want to pursue an internship with a for-profit employer, there aren’t going to be many circumstances where you can have an internship and not be paid and still be in compliance with the law,” Nancy J. Leppink, the acting director of the federal Labor Department’s wage and hour division, told The New York Times.
Predictably, internship opportunities this summer were more competitive and harder to come by. Some employers substituted paid internships for unpaid ones, but others dropped their internship programs altogether.
This raises the question: Whom, exactly, are the wage and hour laws supposed to protect? Is someone who donates his or her time, whether to a commercial enterprise, a non-profit or the government itself, actually “employed” at all? We don’t have slavery or serfdom in this country. Nobody tries to support a family on a job that pays nothing. If someone can afford to give away his or her time, why would we stop them?
The obvious answer is because other workers, and particularly the labor unions aligned with the Democratic Party, don’t want to see potential paying jobs displaced by bushy-tailed young preppies who are willing to work for nothing. Jobs, in this view of the world, are the property of the people who get paid (or might get paid) to do them, so permitting free labor takes something away from the unions’ dues-paying constituency (which amounts to less than 10 percent of the country’s private-sector work force, by the way).
Critics of unpaid internships also argue that the children of the rich can afford to work for free, building up resumes that will allow them to snag more prestigious jobs later, while children from less affluent families must find paying jobs. Where were these advocates on behalf of impoverished youth three years ago, when Congress was pricing paycheck-dependent teens out of the labor market?
Led by President Obama, Democrats are proud of their efforts to give everyone a more equitable slice of the nation’s wealth. But when this ideal is put into practice, we often discover, as in this oppressively hot summer of idleness, that what everyone gets is a fairer share of nothing.
Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book,
Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us,” and Chapter 4, “The Family Business.” Larry was also among the authors of the firm’s book
The High Achiever’s Guide To Wealth.
Posted by Larry M. Elkin, CPA, CFP®
This toasty summer, ideal for hanging out at the nearest beach or swimming pool, has been anything but idyllic for young people who need money and work experience rather than a long stretch of idle days.
Too bad for them if they do. Low-skilled, inexperienced young workers, those who have the greatest difficulty reaching the first rung of a career ladder, are roadkill on our country’s misguided route to what some people consider economic justice.
As soon as Democrats regained their congressional majorities in 2007, they rushed to give low-wage workers a fairer deal by boosting the federal minimum wage from $5.15 to $7.25. The final portion of the increase was phased in last summer.
There was plenty of rhetoric about the law’s benefits for low-income workers. “This is the day for the people who empty the bed pans, change the bed linens, sweep the floors and do the hardest work of America,” Rep. Rob Andrews, D-N.J., proclaimed when the House approved the measure.
Congress was warned that raising the wages of entry-level workers was not going to raise the value of the work they do. Low-skill jobs disappear as soon as the required wage (plus Social Security, unemployment insurance and other often-overlooked payroll costs borne by employers) exceeds the value of the work. The National Restaurant Association reminded lawmakers in 2007 that the previous minimum wage increase, a decade earlier, had cost 146,000 jobs in the restaurant industry alone.
Lawmakers also were well aware that most minimum-wage workers are not primary household breadwinners. They tend to be youths, retirees, part-timers and people seeking to enter or re-enter the workforce after suffering a disability. Economists have long urged Congress to set a lower minimum wage, or even offer an exemption, to let such individuals find low-value jobs that can provide critical work experience.
But Democrats, who campaigned hard on the minimum wage issue when they captured the Senate and the House of Representatives in 2006, brushed aside the warnings and attached the minimum wage boost to a funding measure for the Iraq war. This helped the bill hold enough Republican support to get through the Senate, and it guarded against a veto by then-President George W. Bush.
Many states have even higher minimums. In Washington workers are required to receive $8.55 an hour.
Those who “do the hardest work of America” should now be enjoying the full benefit they were promised when the minimum wage was increased. But, as foretold, many of the would-be workers are now making $0 an hour instead of the old minimum of $5.15.
In April, as young people scrambled to find jobs for this summer, the unemployment rate for workers between the ages of 16 and 24 hit a record high of 19.6 percent. The rate for 16- to 17-year-olds, who are least likely to have relevant job experience, was even worse.
Not all young people are affected by the minimum wage. At our firm, even summer interns and associates earn $12 to $16 an hour, but these are students who attend elite schools and have highly developed skills. They are also fortunate, because we have an old-fashioned philosophy of expecting real, productive work from our summer help, and of paying them a fair market rate in return.
Some youths who cannot find paying work for the summer might ordinarily seek unpaid internships, which at least can help make them better qualified for future job searches. But, this summer, the would-be summer interns also ran afoul of government efforts to “help.”
Federal and state regulators are clamping down on unpaid internships, arguing that, in many cases, the positions are simply ingenious ways to skirt wage laws and exploit young people for free labor. In April the Obama administration issued new guidelines to help companies determine whether their unpaid internship programs violate the Fair Labor Standards Act.
The answer, according to the newly aggressive regulators, is almost always yes. “If you’re a for-profit employer or you want to pursue an internship with a for-profit employer, there aren’t going to be many circumstances where you can have an internship and not be paid and still be in compliance with the law,” Nancy J. Leppink, the acting director of the federal Labor Department’s wage and hour division, told The New York Times.
Predictably, internship opportunities this summer were more competitive and harder to come by. Some employers substituted paid internships for unpaid ones, but others dropped their internship programs altogether.
This raises the question: Whom, exactly, are the wage and hour laws supposed to protect? Is someone who donates his or her time, whether to a commercial enterprise, a non-profit or the government itself, actually “employed” at all? We don’t have slavery or serfdom in this country. Nobody tries to support a family on a job that pays nothing. If someone can afford to give away his or her time, why would we stop them?
The obvious answer is because other workers, and particularly the labor unions aligned with the Democratic Party, don’t want to see potential paying jobs displaced by bushy-tailed young preppies who are willing to work for nothing. Jobs, in this view of the world, are the property of the people who get paid (or might get paid) to do them, so permitting free labor takes something away from the unions’ dues-paying constituency (which amounts to less than 10 percent of the country’s private-sector work force, by the way).
Critics of unpaid internships also argue that the children of the rich can afford to work for free, building up resumes that will allow them to snag more prestigious jobs later, while children from less affluent families must find paying jobs. Where were these advocates on behalf of impoverished youth three years ago, when Congress was pricing paycheck-dependent teens out of the labor market?
Led by President Obama, Democrats are proud of their efforts to give everyone a more equitable slice of the nation’s wealth. But when this ideal is put into practice, we often discover, as in this oppressively hot summer of idleness, that what everyone gets is a fairer share of nothing.
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