Wednesday, January 29, 2014

Minimum wage factoids

For years I've had fun at cocktail parties by asking people what percent of all the people who work in the U.S. were paid minimum wage or less. Of all the people I've asked, only one has come even close to the right answer. The vast majority of the answers I've received (try it yourself!) range from 10% to as much as 50%. Clearly, the public doesn't have a clue, and that's why politicians are able to exploit the minimum wage issue for political gain.

But don't take my word for it, just look at the facts as calculated by the BLS, in their Characteristics of Minimum Wage Workers 2012:

In 2012, 75.3 million workers in the United States age 16 and over were paid at hourly rates, representing 59.0 percent of all wage and salary workers. 1 Among those paid by the hour, 1.6 million earned exactly the prevailing federal minimum wage of $7.25 per hour. About 2.0 million had wages below the federal minimum.2 Together, these 3.6 million workers with wages at or below the federal minimum made up 4.7 percent of all hourly paid workers.

The BLS also tells us that, as of the end of 2012, there were roughly 140 million non-farm employees in the U.S. So the percentage of all the people working who were making minimum wage or less is (1.6 + 2.0)/140 = 2.6%. Less than 3% of all those who work in the U.S. make minimum wage or less, and over half of those earn less than the minimum wage. By the same logic, over 97% of those who work already make more than the minimum wage without any help from government fiats.

But there's more, and its impressive: "About three-fifths of workers earning the minimum wage or less in 2012 were employed in service occupations, mostly in food preparation and serving related jobs." In other words, 60% of those making minimum wage or less work in restaurants, where they undoubtedly make more than minimum wage if you count their tip income. That means that approximately 1% of those who work (40% of 2.6%) in the U.S. actually make minimum wage or less for their hourly efforts. Fully 99% of those who work effectively earn more than the minimum wage.

Raising the minimum wage would therefore benefit only 1-2% of the working population, but it would probably make life miserable for young and inexperienced workers, who could find that the jobs available to them have vanished because the minimum wage has been set at a level that exceeds their productivity. The unemployment rate for those aged 16-19 is already sky-high, at almost 24%.

Let's not make things worse for those who need a low minimum wage in order to get their first job.


Benjamin said...

How unimportant as a labor market distortion is the minimum wage?
Right now there are more Americans receiving monthly "disability" checks from the VA (3.7 million) than there are earning the minimum wage.
Time to phase out the minimum wage...and the VA.

Hans said...

"In 2012, 75.3 million workers in the United States age 16 and over were paid at hourly rates, representing 59.0 percent of all wage and salary workers."

Why was salary workers added at the end of the sentence?

I had read it was 3% somewhere. If you remove the waiters and waitresses, it is a mere 2% and the Socshevik continue to work this issue with no effective opposition from the Repubcos.

BTW, the part timer percentage in 1979 was 13%, but a decline of 60% matters not to the idiots in WDC.

After all these part timers are just political larvae for the Beltway Elites.

Hans said...

Scott Grannis has just discovered a new 1% class!

What are the 99%ers going to do?!

William McKibbin said...
This comment has been removed by the author.
Unknown said...

Curious if the stats include all the under the table workers in the country. Surely a good % of the armies of child care workers, construction workers, unskilled labor and domestic workser are paid at minimum wage or below.
I understand the prevailing wage for nannies under the employment of Indian diploments is about $2 an hour. Seriously though, I walk around my neighborhood and see landscapers, nannies, labourors, and maids most being paid cash - I suppose many are paid above minimum wage - but I would bet many are not.

William said...

If farm workers were included, it would be even less, No??