The Floor is the Limit

On December 1, 2008 the National Bureau of Economic Research made an announcement that the United States had entered into a recession on December 1st of the previous year and declared by June 2009 the recession had ended. Effective July 29 succeeding this recession was the federal minimum wage increase from $5.15 to $7.25 an hour. The decision of the increase is based off the standard cost of living, which positions inflation as a determinant of this price. Although this price was determined in a better labor market, it is a generally understood concept that when wage increases the number of workers decreases.
In a labor market two major factors are supply, or the households, and demand, which are the businesses. In a natural environment the Law of Demand and the Law of Supply are at work. The businesses pay a rate the workers are willing to work for. The Fair Labor Standards Act enforced by the U.S. Department of Labor creates a price floor, allowing no wage to be less than floor rate. Because of the federal minimum wage rate, disequilibrium is created among the market. Most people are willing to work but the increase causes a decrease in the businesses willingness to provide jobs thus a surplus is created. In November 2007 the unemployment rate was 4.7 percent as recorded by the Bureau of Labor Statistics, as a result of this surplus of workers the unemployment rate grew 5.2 percent.
The alteration in the market forms two categories of people, the currently employed are the “winners” in the scenario and the currently unemployed are the “losers.” The “losers” can be further broken down; losers of equilibrium are the people who had jobs but got laid off due to the increase in price of labor and losers of supply are those now willing to work because of the increase in pay but can no longer find a job. As the article states teens between the ages of 16 through 19 tend to be the underdogs. Teen employment has fallen approximately 17 percent since the 1990s and is still declining. Many other factors contribute to a low teenage employment rate; such as an increase in school enrollment, but in the end it all boils down to how much profit can the company make? Willingness to pay is a major concept brought up in this article, and it states “…a typical teenager may not be worth more than $4 or $5 an hour to an employer.” So why would any employer want to pay a higher wage for an unskilled worker with no experience more prone to make mistakes, then an experienced less prone worker with the ability to get more done? This is the dilemma employers’ face as a result of the price floor and the teens are left with the results of being jobless.

http://money.usnews.com/money/careers/articles/2010/05/26/why-jobless-teens-may-have-more-to-blame-than-the-recession?PageNr=1