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May 12, 2005

Cooeee! Earth Calling Bob Herbert!

Cooeee! Hey, Bob, over here! Wheeeowheeet! Someone’s trying to get your attention! Earth calling Mr Herbert, please come in Bob, we have important information for you!

I’ve been criticized for making fun of Our Bob before, one economist writing to me pointed out that it was all really rather icthyic, firkin, kablooie (them economists sure do talk funny, hunh? Fish. Barrel. Bang. is what is meant). Simple it may be yet both fun and important as today’s column shows:

For example, a recent report from the Center for Labor Market Studies at Northeastern University in Boston tells us that the employment rate for the nation's teenagers in the first 11 months of 2004 - just 36.3 percent - was the lowest it has ever been since the federal government began tracking teenage employment in 1948.

Those 20 to 24 years old are also faring poorly. In 2000, 72.2 percent were employed during a typical month. By last year that percentage had dropped to 67.9 percent.

A low teenage employment rate? Not sure about you Bob but where I come from that’s regarded as a good thing. Means the little terrors are in school. Where they need to be for as the report goes on to point out, high school drop outs are worse off than those of a generation ago, only those with college education are actually making headway.

Some segments of the population have been all but completely frozen out. In Chicago, only one of every 10 black teenagers found employment in 2004. In Illinois, fewer than one in every three teenage high school dropouts are working.
....
It shouldn't be surprising that the standard of living of large segments of the population is sinking when employers have all the clout, including the powerful and unwavering support of the federal government. Workers can't even get a modest increase in the national minimum wage.

It’s that last sentence which is so intensely irritating, the one which has anyone with a semblance of economic literacy reaching for the shotgun.

Step back for a moment. There is some controversy over whether the minimum wage, at its current levels (for different states can have higher ones than the federal one) actualy causes problems. Everyone agrees that at some level it will cause problems, no rational being thinks that $50 an hour for everyone would not have damaging effects. Everyone also agrees what those bad effects would be, if indeed they are there.

By raising the cost of untrained and unskilled labour above its market clearing price, the minimum wage would mean that some (or much, depending upon how high above the clearing price it was) of that labour would go unused. High school dropouts would simply be too expensive to employ given their productivity. Please, don’t argue here, there is nothing to argue about. Everyone agrees that this would be true at $20 an hour, $50 an hour (especially when the average US wage is $16 an hour), the question is, is this true at $5.15 an hour?

As Bob points out, we certainly seem to have evidence that this is happening. Theory predicts that if the minimum wage is set too high then the least productive labour won’t get used at all. What do we see? Lots of the least productive labour not being used. Any economist would surmise (note, not insist, just take as a starting point for an investigation) that this shows that the minimum wage is too high.

What does our genius suggest? That there should be an increase in the minimum wage? So yes, it really does look like Kim du Toit’s armoury will be required to blast icthyoid remains all over the countryside.

There is an explanation for this, of course. Bob doesn’t actually believe in economists you see:

Get out of the newsroom; that's Herbert's idea. Get off the phone with the economist, and talk to that guy on the street. What has the economic upturn done for him lately?

Bob, please, phone an economist. If that’s just too way out for you, too much against your principles, could you just try having a little chat round the water cooler with Paul Krugman? Crazed loon he may be but he is an economist who works at the same place you do, some knowledge might just rub off.

May 12, 2005 | Permalink

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Comments

>one economist writing to me pointed out that it was all really rather icthyic, firkin, kablooie (them economists sure do talk funny, hunh? Fish. Barrel. Bang. is what is meant).

No wonder economics gets such a bad press, if real economists won't defend it against populist anti-economist nonsense. I'm glad you're doing so, Tim.

Posted by: Scott at Blithering Bunny | May 12, 2005 12:07:21 PM

A low teenage employment rate? Not sure about you Bob but where I come from that’s regarded as a good thing.

I don't know if you've spent time in the States, but I found that, there, having a job through high school and college, no matter how crappy it is, is considered part of education.

I don't know if you read what Bill Gates said to a class of high school students (I forget where I read itand I am too lazy to find it) but the gist was: he didn't consider today's high school curriculum, the requirements to graduate, the skills they learn, are irrelevant to the job market.

Small wonder then that American kids work through school. Experience doing something is going to get you further than a high school diploma, especially if you're unlikely to be going to college, and the enrollment and graduation rates in the States are astoundingly tiny.

But you're also missing one other thing: working in the service industry, and not going to college, are much less of an inhibitor to the upwardly mobile there than they are, say, here in France. Here, if you don't get a degree out of school, you don't do continuing education later. There is no such thing as retraining for a new career in later life in france. It's extraordinarily static. I prefer the American way.

Posted by: Katie | May 12, 2005 2:49:30 PM

"A low teenage employment rate? Not sure about you Bob but where I come from that’s regarded as a good thing. Means the little terrors are in school."

This is a point that not enough people make. Far too much is made of the dubious benefits of after school jobs.

Posted by: Michael at Half Sigma | May 16, 2005 12:05:29 AM