Thursday, July 27, 2006

Minimum wage sleight-of-hand

I'm about a week or two late in tackling this but late is better than never.

In disputing the need for a minimum wage increase many public figures argue that doing so will have little or no impact on low-wage workers because of that fact that only about 2 or 3-percent of hourly workers earn at or below the minimum wage anyway. A quick Google search will yield a great deal of commentary from around the country peddling some version of this argument. Here are some typical examples of this line of reasoning (all emphases are mine):

Example 1:

"Actually, the minimum wage seems more a symbol of our good intentions than an issue of great economic significance. Relatively few people are paid the minimum wage and fewer families subsist on $5.15 per hour. According to the Bureau of Labor Statistics, in 2004 only 520,000 workers out of a total of more than 73.9 million who were paid on an hourly basis earned the minimum wage. In reality, almost three times that number (1.5 million) earned less than the minimum."

The Downside of a Hike in the Minimum Wage
Peter Z. Grossman
Indianapolis Star, July 11, 2006

Example 2:

"So how much of an impact would raising the minimum wage have in New Hampshire, when very few workers, even in traditionally low-paying jobs, are making that rate?"

"According to New Hampshire Employment Security, approximately 16,000 workers out of a statewide labor force of 726,400 — that’s around two percent
— make $5.15 an hour or below. And many of those work in “tipped positions,” such as waiters/waitresses, who by law only have to be paid 45 percent of the minimum hourly rate."

Debate Rages Over Calls to Raise Minimum Wage
Shawne K Wickman
Manchester Union-Leader, July 23, 2006

Example 3:

"According to the U.S. Bureau of Labor Statistics, in 2004 about half of all hourly paid workers earning at or below the minimum wage in the U.S. were younger than 25; one-fourth fell between the ages of 16 and 19. For hourly paid workers over 25, only 1.7 percent earned a wage at or below the mandated minimum, with many of them retired and working to supplement Social Security or other retirement income. Furthermore, 60 percent of the workers who earn the minimum wage or less were employed in food service jobs such as waiters, waitresses and bartenders, workers whose wages are usually supplemented with tips."

"Conclusion: Very few hourly paid workers in the United States earn a minimum wage or less, and those who do are predominantly younger workers gaining valuable experience, older workers supplementing retirement income or workers whose income is supplemented by tips."

Who Pays the Minimum Wage?
Mark A. Steckbeck
Mackinac Center for Public Policy

Well, that really does make it sound insignificant, doesn't it. But is this really the issue? Will a minimum wage increase really only affect workers who earn exactly $5.15 per hour or less? Lets examine that. The proposed minimum wage increase recently debated in congress would have raised it to $7.25 per hour. Not counted in these seemingly powerful arguments are the workers who earn between the current minimum and the proposed new level. So what about the workers who earn $5.16 per hour, or $5.17 per hour, $5.18, $5.19, %5.20... etc (keep going with that until you reach the new proposed minimum). Wont they be affected by a minimum raise hike to $7.25 as well? Can they get some love?

The only reasonable way to measure the effect of a minimum wage increase is to measure the impact it would have all on the workers who earn less than the new proposed limit, not just the ones who are exactly at the current minimum. Give me those figures and then we can talk. This is something that should be obvious to our learned men of letters and ceritifcates in government and the news media. Why wont any of them bother to notice that?