A few of the policies that are causing the problem are explained in this article from the American Enterprise Institute. I have highlighted the policies that discourage employers in the snippet I excerpted below.
If Washington is serious about helping this vulnerable population, it should focus on increasing workers’ take home pay and lowering the business employment costs. Conventional wisdom preaches increasing minimum wages. But a far more effective policy would be to simply exempt younger workers and their employers from paying taxes related to their employment.
People in the workforce typically get their start when they are young – beginning with some entry level job where they learn basic job skills, develop effective work habits, and earn a modest wage. This important first step gives them a chance at earning wages and achieving a level of success that facilitates advance up the economic ladder. Work habits and skills are generally learned early in life or unfortunately for too many, not learned at all.
The long term damage caused by this lack of employment is very large. Income mobility has declined. The sad fact is the probability of people at the bottom moving up the income ladder is lower than it was 20 and 30 years ago. Many studies have demonstrated that three factors determine most of the difference between those who start in poverty and stay there and those who don’t – finishing high school; avoiding becoming a teenage parent, and getting a full-time job. Those who do all three have only a 2 percent chance of living in poverty and a 75 percent chance of joining the middle class.
Many economists and social scientists have suggested both demand and supply reasons why youth unemployment is so high. On the demand side, the national safety net – Food Stamps, Earned Income Tax, welfare and subsidy programs of all kinds – substantially reduce the relative benefit of working. In other words, the wage premium for working versus taking advantage of benefit programs on an after-tax basis is simply too small to encourage many people to work.
If a young person enters the work force at the minimum wage, he grosses $7.25 per hour. From this, in a place like Los Angeles, he pays federal and state income taxes and Medicare and Social Security payroll taxes which total $1.11. So, out of the $7.25 earned, he keeps just over $6. If he is single and without children, he won’t qualify for the Earned Income Tax Credit (EITC) or food stamps.
On the supply side, the cost of employing young people is high relative to their economic contribution to potential employers. An entry-level employee costs his employer much more than $7.25. In addition to his wages, the employer also pays Social Security and Medicare taxes, plus unemployment insurance, that add on an average of 92 cents. So today, the new employee costs the business $8.13 per hour, of which the young employee keeps only three-quarters.
This cost will increase further when the Affordable Care Act kicks in. Beginning in 2015, if the employer has more than 50 employees, he will have to provide health insurance for full-time workers or pay a $2,000 fine – which comes to $.96 per hour. That will make an abysmal employment situation even worse.
Overall, public policy ought to be aimed at encouraging businesses to create entry level jobs. Perversely, attempts to increase the minimum wage and institute so-called living wages would do the exact opposite. If government wanted to help create a permanent economic underclass, it would implement exactly the policies that are in place. All of us who want people to enjoy earned success ought to be outraged at these government policies.
This is important, because very often the policies proposed by people on the left are not designed to solve the problem. Thomas Sowell argues that the real purpose of leftist policies is for leftist leaders to feel self-important by getting applause from those who are economically ignorant. They push policies that sound good but that don’t actually work.
The good news is that young people are waking up. According to a Harvard University survey, 57% of young adults now disapprove of Obamacare. Even they are starting to think about what is happening to them. Maybe they can avoid the slavery that awaits them under the Democrat’s massive program of intergenerational theft, but I’m not optimistic. They have really short attention spans, and you don’t learn the fundamentals of economics on Instagram and Pinterest.