Over at Ezra Klein's blog, Andy Stern, former president of SEIU, and Dean Baker of the Center for Economic and Policy Research have agreed on a number of job creation measures to finally scrub away the icky stain of unemployment and spit shine the economy back to normalcy. One such idea, the creation of government-run youth employment programs, merits a little extra attention.
Stern and Baker correctly point out that the recession has hit youth especially hard, with 26.3 percent of 16-19 year olds in the labor force unemployed, compared with 9.6 percent unemployment of the general population. Their answer is to create temporary "public sector jobs" until the labor market improves. Under such a plan, the government would ostensibly find useful work for kids to do, provide them with bankable skills for future jobs, all the while giving them a steady paycheck to keep them off the dole during tough times.
If you think you've heard this idea before, it's because you have: it's 75 years old. The Works Progress Administration (WPA), which employed out-of-work Americans from 1935 to 1943 in fields from public works construction to art and drama, was a signature element of President Roosevelt's plan to bring America out of the Depression. Over its lifetime, it created almost eight million jobs, potentially keeping millions of Americans out of unemployment. So why not just create WPA 2.0 to stimulate youth employment instead of waiting on that clunky old private sector to get its act together?
Unfortunately, a deeper look at the WPA's effects on the macroeconomy reveals it may not have been so great after all. A 1990 paper by economist Robert Margo concluded that WPA employees were less likely to find private sector employment as job growth increased and more likely to be unskilled. Indeed, the WPA may have actually aggravated long-term unemployment during the Depression by disincentivizing workers from looking for stable jobs in the private sector, without giving them useful skills to help them find their next employer.
There is little indication that the modern government employment plans targeted at youth have been any more successful. The D.C. Summer Youth Employment Program, designed to give jobs to kids who might otherwise turn to all sorts of idleness and vice, was just this year the subject of an embarrassing setback for outgoing Mayor Adrian Fenty's administration. After a public spat, the District Council refused the Mayor's request for an extension to the program, which had run massively over budget and was dogged by allegations of a quantity-over-quality, "make-work" approach to its activities.
If lawmakers want to help kids find jobs, they would have more luck fixing the flaws in their current policies, not introducing new ones. The big culprit here: the minimum wage. Minimum wage laws kill jobs by making employing workers more expensive. Youth are especially vulnerable to this phenomenon because they, of all segments of the population, are most likely to work minimum wage jobs: the economics literature is quite clear on this point. Remove the minimum wage and you remove a substantial disincentive to hire the young. New government interventions, like a make-work program for kids, would only be the latest in a long series of misguided, if well-intentioned, plans to help struggling workers.