On The Minimum Wage

I got an email today from some group telling me that the majority of small business owners support annual increases to the minimum wage.  I found that odd, so I clicked through to the study.   I will save you the time looking for it, the study had no discussion of how it identified a representative group of small business owners, or even how it validated the respondents were business owners in the first place.  All it says is that it was an "internet survey".

It turns out the second question of the poll answers the first.  The people in the poll overwhelmingly supported raising the minimum wage because the businesses polled overwhelmingly did not hire minimum wage workers.

In fact, the most lost fact in the minimum wage debate is the percentage of the work force that actually earns the minimum wage.  According to the Department of Labor, in 2011 only about 3% of all employed wage and salary workers were making minimum wage or less.  However, about half of these folks are people who mainly work for tips (which are not included in the base wage number).  When you exclude the folks whose tips presumably take them over the minimum wage, just 1.5% of American workers make minimum wage.

Minimum wage work is a niche, generally confined to special situations and to low-skilled young people entering the work force.

Sure, a minimum wage hike would help many of those 1.5%  (at least those who did not lose their jobs when the higher wage rates priced out their work).  But what about the group five times larger than this, the unemployed?  Are they really better off when the bar they have to clear to find their first work keeps getting raised?  If no one will currently hire 30% of teens at $7.25 an hour, how many will get hired at $10 an hour?

Here is the question the group should have asked:  For those of you who currently pay some workers minimum wage, would you expect to employ more, the less, or about the same after an increase in the minimum wage?

  • aczarnowski

    That 3% number is new to me. My gut feels that's a bit low but I don't think it matters to the political debate.

    Someone mentioned (here?) that benefits and salaries of many others groups are indexed to the minimum wage. Unions, etc. If true, sleight of hand benefit increases to constituencies is the real story.

  • Joe_Da

    The basic law of supply and demand provides that as the cost of labor rises, then the demand for labor will decrease. The common interpretation of the economic theory is that it will increase unemployment among the segment of the workforce at or near minimum wage. Conservatives and republicans have jumped on the increased unemployment as a reason not to increase the minimum wage.
    Proponents of increasing the minimum wage like to point out several studies which show little if any change in unemployment rates due to changes in the minimum wage. This in effect neutralizes the primary argument against minimum wage increases.
    What the proponents fail to mention is that while those studies show little or no change in employment rates, do in fact show a reduction in hours worked - which is precisely what the theory of supply and demand does say will happen.
    One additional point is that there is a survey of other studies ( CEPR)

  • http://twitter.com/Vypuero11 Kurt
  • skhpcola

    "The CEPR study, (unsurprisingly being a proponent of increasing the
    minimum wage) makes the claim that hours worked do not get reduced..."

    I'm curious whether they will acknowledge the fact that OzeroCare actually is reducing hours worked in millions of entry-level jobs. I'm guessing not, because progtards are blue ribbon-winning champions at self-delusion and mendacity.

  • perlhaqr

    $10 just isn't enough. The minimum wage should be $50. That'd solve all our problems.

  • Not Sure

    "The CEPR study, (unsurprisingly being a proponent of increasing the minimum wage) makes the claim that hours worked do not get reduced..."
    How many minimum wage workers does CEPR employ?
    Talking with friends who run a business that hires minimum wage workers almost exclusively, the subject of the minimum wage came up. I asked them how an increase would affect them and what they'd do about it. Their comment was that in order to remain profitable, they needed to keep total wages at some percent (don't remember the number) of gross sales. So- unless increasing the minimum wage would also result in increased sales (doubtful), the only options would be to either keep employees' working hours at the same level and raise prices or keep prices at the same level and reduce the hours employees worked.
    Guess which option is less likely to drive away customers?

  • http://www.facebook.com/people/Russ-Armstrong/100000148647269 Russ Armstrong

    Reality check. The real minimum wage in the US is the hourly rate, paid in cash, at which you can hire an illegal alien. Whataya think? Six bucks? Five?

  • Harry

    I thought that the argument among people who live in the real world about the minimum wage and free trade, at least among those who work and put their own money at risk (that is, not theoretical sophists) had been settled. You have to be stupid to argue for either. Or dishonest, if you know better. I am not sure which category holds the higher ground.

    Now, I know the unions have reasons for advocating a higher minimum wage. They also have reasons for opposing free trade. They may think it is in their interest. The political class may believe it is in their interest. But they in the end are lying or stupid or both if they say it is in the interest of people not included in their group.

    I am sick of their lies and stupidity, and I hope it does not bring us all to ruin.

  • obloodyhell

    Not to suggest support for the notion of minimum wage or agreement/disagreement with the articles surrounding it, I don't think it's entirely honest to talk about only "1.5% of the pop getting minimum wage" -- simply because I think the overall ARGUMENT about it being insufficient is that it's not sufficient to live on if you live alone and support yourself (much less so if you support others, as well, i.e., "children" and/or a wife). This is where the whole "living wage" argument comes into play.

    So, really, when you choose your stat, it would make far more sense to run it for people making close to the minwage -- yeah, you can get lots of debate over what constitutes "close" to the minwage -- let's say it's anywhere from 1x to 1.25x the minwage -- I suspect that 1.25x minwage is more than you can make at McD's with McSkills, or very close to it -- after that point the manager is going to let you go because he can replace you with 10hrs of other employees for the same 8hrs you work for. And anyone who knows anything about the operation of McDs knows that it's a lot more about bodies than it is about skilled, hardworking employees (which is why McD's is such a mediocre place to work for if you have ANY ability to work someplace better).

    So, in that vein -- what is the percentage of workers making less than 1.25x minwage?

  • obloodyhell

    }}} because progtards are blue ribbon-winning champions at self-delusion and mendacity.

    I believe this is a fancy way of saying "they're a bunch of ephing morons". But we already knew that, right? :-D

  • skhpcola

    As much as we _think_ that we know that, LartardG. will be along shortly to caterwaul in his most pitiful and plaintive effeminate voice that we're all wrong and he is all right. Really, his sector of sub-humanity wouldn't have even rated stand-in duty on 'Planet of the Apes' re-makes.

  • obloodyhell

    }}} My gut feels that's a bit low

    See my comment above. It's probably true but it ignores the number of people making US$.05 above minwage, which is hardly a substantial change, and likely encompasses a large chunk, as does making $.10 above minwage.

    I repeat, not arguing the merits or issues, just noting where I suspect the "reality" lies, which is a bit more than 1.5% or 3% for those making substantially under the so-called "living wage".

    I think there's a notion of a wage that one can begin to feel "comfortable" at. That has nothing to do with whether you have the capacity to EARN that amount, but I think you could find some consensus on it (which would likely relate to location, too, of course. It's a lot cheaper to live in Boise, Idaho than Manhattan, NY).

    It would probably tie to having a place of your own (likely a rental), owning and maintaining and operating a car that wasn't an UTTER PoS, not having to scrimp desperately on food purchases, able to eat out at least once a week somewhere not too expensive (i.e., maybe two McMeals in cost), and about 10% above that for other random amenities.

    Somewhere around that is probably a "comfortable wage" and is really where the cut-off point is for whining too much.

  • skhpcola

    I'm not so sure, OBH. I've known folks that worked at, managed, and/or owned national fast food joints, and turnover churn is a horrible waste of money. Some places pay substantially (maybe 33% premiums WRT min. wage) more than the mandated base wage, just because good employees stick around, do the job, don't run off customers, and learn the skills to assume more responsibilities. Really, even cut-rate fast-food joints aren't all about nominal wages...the actual costs of hiring and training fit in there prominently.

    I'm not young, but I'm not old. I remember being paid $3.10/hr to bag groceries. A few years later, I made $4/hr to be a masonry laborer building a hospital on a beach. Those seemed fair at the time, because I was generally just ephing around and trying to grab life by the 'nards. I'm still doing that. ;)

  • gattsuru

    By the age of 25, the average pay for hourly workers hits 12 USD/hour, so there's usually a nontrivial chunk of change.

    Of course, hourly wages don't say much when an increasing number of folk are stuck with part-time hours.

  • mogden

    Why stop there? Our lazy and entitled populace deserves more money from evil businessmen!