There are reasons why employers are often afraid of hiring youth at their businesses.
Why Hiring Youth is Risky for Employers
1. The Productivity Mystery
Youth productivity is a big concern for employers. Especially because of the lack of a proven track record or extensive work experience. This uncertainty can lead to wage rigidity and contribute to unemployment. We therefore end up with a complex hiring landscape. It’s important for youth to know these details when negotiating pay.
2. Wage Fright is Uncertainty about Youth Productivity
The fear of uncertainty surrounding youth productivity has direct implications for wages. Employers may be hesitant to set lower wages, leading to wage rigidity. This section breaks down the consequences of wage rigidity and its impact on the hiring process.
Uncertainty about Productivity Stops Employers From Hiring Youth
- Employers may not be sure about how productive young workers will be in a job. This uncertainty arises because young individuals may lack a proven track record or extensive work experience.
Wage Rigidity Increases Barriers to Hiring Youth
- Employers may be hesitant to set lower wages for young workers due to the uncertainty about their productivity. They might choose to offer wages that are relatively high to attract more experienced workers.
- This reluctance to adjust wages downward creates a situation of wage rigidity. In other words, wages get “stuck” at a certain level. This happens even if the market conditions suggest they should be lower based on productivity.
Contribution to Youth Unemployment: Fewer Youths Hired
- It’s a problem when employers are reluctant to hire at the wages demanded by potential employees (including young workers). This can lead to a situation where more people are looking for jobs than there are job opportunities available.
- The reluctance to adjust wages may result in fewer job openings. This then contributes to unemployment as workers, including young ones, struggle to find employment.
Now you know how uncertainty about the productivity of youth can lead to wage rigidity. And that this is when wages are kept higher than what market conditions might dictate. Then it contributes to unemployment. This happens when employers become less willing to hire at those relatively higher wages. Especially when they are individuals with less proven experience or a track record.
But This Theory Has a Counter-Theory
Here are a few counterpoints:
Investment in Training and Development:
- Employers may view uncertainty about youth productivity as an opportunity to invest in training and development programs. By providing skill-building opportunities, employers can enhance the productivity of young workers, reducing uncertainty and potentially justifying higher wages.
Flexibility in Employment Contracts When Hiring Youth
- Instead of being rigid in setting fixed wages, employers can try more flexible employment contracts. For example, this could involve performance-based pay. Or they can use variable compensation structures that align with the individual’s productivity and contribution to the organization.
Focus on Potential and Innovation:
- Some employers may see hiring young workers as an investment in potential and innovation. Despite a lack of proven experience, youth can bring fresh ideas and a willingness to adapt to new technologies. This makes them valuable assets to the company.
- In competitive labor markets, employers may not have the luxury of maintaining rigid wage structures. If a company is unwilling to adjust wages based on productivity, it risks losing skilled workers to competitors who are more responsive to market conditions.
Government Policies and Support:
- Government policies, such as subsidies for hiring young workers or support for training programs, can mitigate the concerns about productivity. These measures can encourage employers to take on younger individuals by providing financial incentives or reducing the perceived risks associated with uncertainty.
While uncertainty about youth productivity remains a valid concern, the article highlights counterarguments and alternative strategies for employers to navigate this hiring challenge. It emphasizes the importance of industry-specific considerations, economic conditions, and organizational practices in shaping effective hiring practices for young talent. By addressing concerns and embracing innovative solutions, employers can tap into the potential of young workers while fostering a dynamic and productive workforce.