Economy

The Minimum Wage Exemption for Students is Totally Unfair

March 26th 2015

By:
Dante Atkins

If you’re a young person or a full-time student, employers aren’t required to pay you minimum wage.

They can pay you up to three dollars less per hour than a co-worker who’s older or no longer in school for the exact same work. As a society, we wouldn’t tolerate exemptions allowing employers to pay women or racial minorities less than the federal standard for the same work done by their male or Caucasian counterparts. But if you’re a young person, it’s perfectly legal for the work you do to be worth less than the minimum wage simply because of how old you are.

You’re kidding me, right?

Unfortunately not. The Fair Labor Standards Act specifically carves out rules that allow employers to pay teenagers and full-time students less for the same work.

Teenagers get the shortest end of the stick. In areas where the federal minimum is the prevailing wage, employers are allowed to pay employees under 20 years of age a minimum of $4.25 an hour. For those keeping score at home, that’s adds up less than $9,000 a year, assuming a 40-hour work week. Sure, there are some restrictions: employers are only allowed to pay that wage for the first 90 days of employment, and then the usual minimum applies. And employers aren’t allowed to displace other workers to hire teenagers at a lower wage. But still: imagine working full-time for an entire 12-week summer and going back to school barely $2,000 richer for it—and that’s before taxes. Unless your state has a higher minimum wage, that’s all that federal law guarantees you as a teenager.

If you’re a full-time student, things are a little bit better—but not by much. Certain employers (retail, service, agricultural, or colleges and universities) can obtain a certificate from the Department of Labor that allows them to hire full-time students for 85 percent of the value of the minimum wage. Now, there are certain restrictions on that too: such employers are only allowed to have full-time student employees work at a sub-minimum wage for a maximum 20 hours a week when school is in session and 40 hours a week when school is out. But if you’re a college student living in a state where the federal minimum wage prevails and you’re looking to get an on-campus job to help pay tuition, it’s perfectly legal for your school to only pay you $6.17 an hour for your efforts. That’s not really going to make much of a dent in the cost of a college education. And there aren’t even age limits on this practice: if you’re a full-time student—no matter how old, it’s still legal to pay a sub-minimum wage under the conditions outlined above.

How many people are affected by this, and who are they?

Millions. The Department of Labor keeps track of the number of employees who are legally being paid wages below the minimum. In 2012, the latest year for which such statistics are available, nearly 2 million people were being paid at a rate below minimum wage, including 935,000 people between the ages of 16 and 24. Of those 2 million, about two-thirds are women, who are suffering disproportionately from the post-recession proliferation of low-wage jobs. Seventy-nine percent of those earning a sub-minimum wage are white.

The Department of Labor doesn’t break down the data further into what exemptions employers are taking advantage of in what numbers—so the collective figure of 2 million includes not only teenage employees and full-time students, but also other exemptions, such as training wages, employment at seasonal operations like amusement parks, and exceptions for employing the disabled at below minimum wage (yes, that exists too).

Why is this a thing?

In theory, the goal behind minimum-wage exemptions for teenagers and students is to encourage employers to hire younger workers, who otherwise would be less employable. Take the 90-day exemption for teenagers, for instance: that seems designed to give employers an incentive to hire teenagers out of school for the summer so long as they’re not using that labor pool to displace other workers. And in general, conservative-leaning economic theory dictates that a lower minimum wage will result in higher employment: if employers can hire teenagers for even less than the paltry federal prevailing wage, that should give teenagers a competitive advantage in the job market, even if they can’t really afford to buy anything with the jobs they get. 

Unfortunately, it’s not really working that way in practice: The teenage unemployment rate is catastrophically high.

Some economists are arguing for eliminating the minimum wage for teenagers altogether, but how many would really be willing to work for even less than $4.25 an hour? More to the point, a deeper analysis of the data seems to show that a lower minimum wage for teenagers doesn’t correlate to a lower teenage unemployment rate. Of the five states with the highest ratio of teenage unemployment to overall unemployment in the table below, three—Utah, Louisiana and Virginia—default to all federal standards (which means employers there are allowed to pay the lowest legal amount under federal law). The other two, North Dakota and Hawaii, don’t have exemptions for teenage workers, but their overall state minimum wage is either right at or very close to the federal baseline. Lower wages, then, are clearly not leading to higher employment.

Teenage Unemployment Chart
*Source: Governing.com, US Bureau of Labor Statistics

So what can be done?

At the federal level, not much. President Obama has been pushing to increase the federal minimum wage to $10.10 an hour, but Republican leaders in Congress will make sure that never happens as long as they’re in charge. Still, that doesn’t change the fact that minimum wage increases are popular, even in conservative states. Let’s take Arkansas, which has been tacking right politically over the past few election cycles: In 2014, the state’s voters passed an initiative that will gradually increase the minimum wage to $8.50 an hour by 2017. Even if legislators are opposed, it’s still a winning issue among actual people—and this is one issue where local governments don’t have to play by the lowest common denominator.