Referred Law 20: Teen Minimum Wage

In 2014, 55% of South Dakotan voters approved Initiated Measure 14 to increase the minimum wage to $8.50 an hour with increases tied to the Consumer Price Index. Senate Bill 177 created an exception, for workers under the age of 18, lowering their minimum wage to $7.50 an hour, with no increase tied to the Consumer Price Index.

Referred Law 20 puts this issue in front of the voters. Unless passed, the law will not go into effect.

Supporters of the law point out that states with high minimum wages also have high teen unemployment. But states that have lower minimum wages also have equally high teen unemployment.
For example, North Carolina, New Mexico, Georgia and South Carolina have low minimum wages and have teen unemployment rates over 20%. Closer to home, in Minnesota and Nebraska, the minimum wage is high, and in North Dakota and Iowa it’s low. But all these states have low teen unemployment, especially compared to the rest of the country.

This seems suggests that South Dakota’s recent increase in minimum wage isn’t going to suddenly increase teen unemployment. In fact, in the short term, overall unemployment has continued to go down.

Supporters also say that having a lower minimum wage for under 18 year olds will create an incentive for businesses to hire them, because the lower wage would offset the cost of hiring unexperienced and untrained workers. But there is already something called opportunity wage, or training wage, for workers under 20. This lets an employer pay a rate of $4.25 an hour for the first 90 days to offset the cost of training someone who might be working for the first time.

Youth unemployment is a serious issue, but South Dakota’s teen unemployment is already far lower than the national average and is similar to other states in the region, so it’s not clear that there’s even a problem to apply a solution to, and even if there was, there doesn’t seem to be any clear evidence that this would be the right one.