Minimum wage facts and fantasies

Interesting post from Scott Grannis.  Good facts to add to the minimum wage conversation...

Minimum wage facts and fantasies

For years I've had fun at cocktail parties by asking this question: what percent of all the people who work in the U.S. are paid minimum wage or less? Of the hundreds of people I've asked, only one has come even close to the right answer. The great majority of the answers I've received (try it yourself!) range from 10% to as much as 50%. My conclusion: A huge number of Americans hold the fantasy belief that a significant percentage of those who work would benefit from raising the minimum wage.

Fact: only 0.5% of those who work take home minimum wage or less.

The facts can be found in a BLS publication from earlier this year: Characteristics of Minimum Wage Workers, 2017.

In 2017, 80.4 million workers age 16 and older in the United States were paid at hourly rates, representing 58.3 percent of all wage and salary workers. Among those paid by the hour, 542,000 workers earned exactly the prevailing federal minimum wage of $7.25 per hour. About 1.3 million had wages below the federal minimum. Together, these 1.8 million workers with wages at or below the federal minimum made up 2.3 percent of all hourly paid workers.

According to the BLS establishment survey, there were 147 people employed in 2017 (those paid by the hour plus those who received a salary), so the percentage of all the people working who were making minimum wage or less was 1.8 /147 = 1.2%. Furthermore, according to the BLS, some 1.3 million of all those who work in the U.S. made less than the minimum wage. In percentage terms, a bit less than 1% (1.3/147) of those who worked in 2017 made less than minimum wage.

But here's where it gets really interesting: "The industry with the highest percentage of workers earning hourly wages at or below the federal minimum wage was leisure and hospitality (11 percent). About three-fifths of all workers paid at or below the federal minimum wage were employed in this industry, almost entirely in restaurants and other food services. For many of these workers, tips may supplement the hourly wages received."

If we assume that the vast majority of those who worked in the restaurant and food service industry (10 million) actually took home at more than the minimum wage (thanks to tips), then in 2017 there effectively were only about 700 thousand people (0.5% of all workers) who actually took home minimum wage or less. Big, under-reported fact: in all likelihood, 99.5% of those who worked in 1017 took home more than the minimum wage for their efforts, and without any help from government fiats. 

So the next time you're at a cocktail party, ask the person next to you to guess the percentage of U.S. workers that earn minimum wage or less. You won't be lying when you tell them it's about ½ of 1%.

Raising the minimum wage would presumably benefit less than 1% of the working population, but it would most likely make it harder for young and inexperienced workers to get a job. It's already hard enough: the unemployment rate for those aged 16-19 is 13.1%, by far the highest unemployment rate for any age cohort. (The unemployment rate across all age groups today is a mere 3.9%.) Politicians should be lobbying to reduce or eliminate the minimum wage, not increase it. The best way for someone to make more than minimum wage is to first get a job, any job, at any wage, then work your way up.