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Minimum wage downside

February 9, 2010

Ball State University economist Mike Hicks believes the higher minimum wage has cost the state 20,000 to 25,000 jobs, and should be tweaked to give entry-level workers a better shot at jobs.

During a typical recession, the number of minimum wage jobs rises as companies shift more work to part-timers. Not this time, though, at least for teenagers. When the latest increase in the minimum hit in July last year, rising to $7.25 an hour, teenage employment actually plunged.

At a practical level the minimum wage is usually meaningless. Even the worst jobs pay well over the minimum. However, that doesn't necessarily hold true in recessions, particularly in extreme rural areas or in inner cities, Hicks says. There, an abundance of teenagers and a scarcity of jobs has eroded market demand below $7.25. So, businesses cut back hiring.

Hicks thinks the minimum wage should be tiered in order to give teens a better shot at learning work skills.

What are your thoughts about the minimum wage? Do you agree with Hicks that it has shut teens out of the job market during the recession? Is there merit in a tiered system? 



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