McJobs still better than no jobs

By Michael Saltsman

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When a fast-food restaurant company recently announced it would be undertaking its own brand of economic stimulus by hiring 50,000 new workers, many people celebrated. With double-digit unemployment looming large, this was a step in the right direction.

Predictably, labor activists sneered at the opportunities “McJobs” represent. Perhaps forgetting what they did at their own first job, they complain that jobs in the service sector are dead ends, don't pay very well, and are detrimental to society.

But what if I told you that nearly one out of every three employed young black males without a high school diploma holds a McJob - and that, without it, they might have no job at all? Instead of recognizing the valuable role of the service sector as a steppingstone in the job market, activists have pushed for increases to the minimum wage that will turn “McJobs” into “NoJobs” for the most vulnerable workers.

The economic downturn has been especially tough on young minorities. At the worst of the Great Recession, the unemployment rate for all young adults hit 27 percent; for black young adults, though, the number was even higher at an astonishing 50 percent.

How did we get to a place where one in two black young adults who wanted to work couldn't find a paycheck? The recession played a part, of course. But new research from labor economists at Miami University and Trinity University shows that the massive 40 percent increase in the federal minimum wage between July 2007 and July 2009 played a role as well - in some cases, a larger role than the recession itself.

In their study, William Even and David Macpherson looked at data on the employment of 16-to-24-year-old males without a high school diploma between 1994 and 2010. They found that each 10 percent increase to the federal or state minimum wage over that time period decreased employment by 1.2 percent for Hispanic males, 2.5 percent for white males, and a stunning 6.5 percent for black males.

This gap exists in part because of where these young people are employed: Black males without a high school diploma overwhelmingly work in restaurants and grocery stores, two sectors of the economy with tight profit margins that are especially vulnerable to labor cost increases.

To demonstrate the magnitude of the employment loss suffered by black young adults, the authors use the recent recession as a point of reference: Between 2007 and 2010, across all 50 states and the District of Columbia, around 34,300 black young adults lost their jobs due to the recession. In that same time period, roughly 26,400 lost their job due to minimum-wage increases at the state and federal level.

In other words, the good intentions of wage advocates and policymakers created the equivalent of a second recession for black young adults over the past four years.

In the 21 states that felt the full effect of the federal minimum wage increase, the numbers are even more striking: 13,200 black young adults lost their job due to the recession while 18,500 lost their job due to minimum wage increases.

Of course, activists might argue that the loss of lower-paying jobs is no loss at all - but experience doesn't back them up. Research from the Labor Department's Monthly Labor Review shows that the “vast majority” of people who start at the minimum wage quickly move into a job earning more than the minimum. But young adults can't reach that higher-paying job without the experience gained in an earlier one.

McJobs are better than NoJobs - something activists should keep in mind the next time they advocate for an increase in the minimum wage.

Michael Saltsman is the research fellow at the Employment Policies Institute, a non-profit research organization dedicated to studying public policy issues surrounding entry-level employment. Comments: Saltsman@

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