Wednesday, January 23, 2008

Only 1 Out of 86 Workers Receives Minimum Wage

Russ Roberts at Cafe Hayek says that his students typically think that about 20% of the American labor force is employed at the minimum wage, when the actual percentage of minimum wage workers (1.7 million) was only 2.2% of all hourly-paid workers (76.5 million) in 2006, according to the BLS.

However, hourly-paid workers (76.5 million) in the 2006 BLS study are only about half of the total labor force of about 146 million, and therefore minimum wage workers represent fewer than 1.2% of all workers (not just hourly workers). In other words, only about 1 out of every 86 American workers receives the minimum wage.

22 Comments:

At 1/23/2008 2:57 PM, Anonymous Anonymous said...

Skewed stats...
How many people earn within $1 per hour of minimum wage?

 
At 1/23/2008 3:21 PM, Anonymous Anonymous said...

This is misleading. What would be more meaningful is how hard it is to live on minimum wage (or any wage) that is below the so-called poverty line.

What does it actually take to live a respectable, but even minimal lifestyle in America's blighted cities?

Minimum wage here is still less then $6 an hour. But even $10 an hour is barely enough to live on. To do so, you skip things like entertainment, auto insurance, new clothes, credit of any sort and on and on.

I buy all my clothes used, pay gas and tags but no insurance, do not go out, don't date, rent a video once in a while, and scramble like hell to stay alive. And I have no debts.

 
At 1/23/2008 3:49 PM, Blogger Marko said...

If you think minimum wage is too low, get a better job. If you think it is too low for other people, donate money to them directly or give to a charity. Sheesh.

 
At 1/23/2008 4:00 PM, Blogger Thomas Blair said...

Anon 2:57,

What do you mean by skewed stats? Do you mean that they don't paint the picture you want them to paint? If they are inaccurate, say so, but don't call them "skewed". They are exactly what the OP says they are.

 
At 1/23/2008 4:04 PM, Anonymous marmico said...

I call bs on the stat that 1 out of 86 workers receive minimum wage. Most states have minimum wage rates which exceed the federal minimum wage of $5.15.

Change the title of the blog post to Only 1 Out of 86 Workers Receives the Federal Minimum Wage.

 
At 1/23/2008 4:23 PM, Anonymous Anonymous said...

Re thomas blair
You're right, it is exactly as the OP has stated. But, he is sort of misleading with the statements because he doesn't discuss how many people earn just over minimum wage.
Whether you earn $5.15 (what is the minimum these days?) or $6.15, you're still as poor as if you earned minimum wage. What's another 8 dollars a day?
I can see this as a useful teaching mechanism in college, but as a real life stat, it is useless.
Plus, there is no way people would seriously think that 20% of people earn minimum wage. Most places give at least a $.01 raise after a few months, so those people guessing 20% didn't put much thought into the question. Kinda seems like an almost trick question. Maybe state it as "how many people earn $5.15 an hour exactly" (assuming that value is minimum wage these days). What about below minimum wage, say for undocumented workers?

 
At 1/23/2008 4:26 PM, Anonymous Machiavelli999 said...

I still think a low % of people earn even the state mandated minimmum wage levels. And to anonymous, all I have to say is if you want better pay, get a better job. If you can't get a better job, it is because you don't have the proper training for those jobs. If you don't want to get the training then thats your own fault.

And by the way you speak as if we have reached a point where everyone lives like you and that in the past noone lived like you. The sad fact for you is that your predicament is shared by less and less people. That 20 or 30 years ago MORE, not less, people lived like you.

Also, any economic hardships you might face (and in fact any economic hardships this country might face)is not to be blamed on free market capitalism but can most likely be attributed to LACK of free market capitalism. (Things like the high price of healthcare, food and gas)

 
At 1/23/2008 4:52 PM, Anonymous marmico said...

I still think a low % of people earn even the state mandated minimmum wage levels.

Well machiavelli, you may be right but the stats presented don't support that position.

Just eyeballing my linked chart and using a back of the envelope calculation that about 20% of the work force is in federal minimum wage jurisdictions, it means that 1.7 million workers out of population of 29 million workers (146 million workers multiplied by by 20%) or 5.9% of workers or 1 in 17 workers receives the minimum federal hourly wage or less in federal jurisdictions.

Do you have any evidence that the same approximate percentage would not apply in state law minimum wage jurisdictions?

 
At 1/23/2008 5:02 PM, Anonymous Anonymous said...

Tell us bank stocks.

 
At 1/23/2008 7:31 PM, Anonymous Anonymous said...

Mark, you made mistake. Doesn't anyone actually read the works cited?"

Cut & Paste from the BLS report, "Of those paid by the hour, 409,000 were reported as earning exactly $5.15, the prevailing Federal minimum wage. Another 1.3 million were reported as earning wages below the minimum.2 Together, these 1.7 million workers with wages at or below the minimum made up 2.2 percent of all hourly-paid workers."

 
At 1/23/2008 8:22 PM, Blogger happyjuggler0 said...

Speaking about not reading links...from the cited blog post:

Even in those states without a minimum above $5.15, (scroll down to Table 3), at least 96% of all hourly workers earn more than $5.15. So state minimum wage statutes can't explain why so many employees earn more than the legal minimum.

So why would greedy employers pay more than the legal minimum?

The answer is simple: competition among employers to attract workers.


Needless to say, this is a far cry from the 20% guesstimate from econ students. It is also arguably a far cry from 1ish%, but not that far, and since the quoted post includes these figures, it is hard to say that something is amiss.

All of which leads to the last quoted paragraph which the minimum wage apologists manage to overlook or not understand: The answer is simple: competition among employers to attract workers [emphasis mine].

 
At 1/23/2008 9:11 PM, Anonymous What JOBS? said...

To the posts who suggested that it is so easy to just go out and get a better paying job - where do you live? If you live in Hillman, Michigan, you're lucky if you can even find a job, let alone one that pays decently. Are you supposed to give up your family to search for these "better paying jobs" that apparently are just there for the taking? How are you supposed to pay to move? I do agree that just raising the minimum wage is not the answer, but it also takes more than just telling people to go find a better job. Get off your high horses and be grateful that you aren't struggling and have to decide this week if you are going to eat or get your medication.

Sheesh.

 
At 1/23/2008 9:36 PM, Blogger Mark J. Perry said...

Mark, you made mistake. Doesn't anyone actually read the works cited?"

Cut & Paste from the BLS report, "Of those paid by the hour, 409,000 were reported as earning exactly $5.15, the prevailing Federal minimum wage. Another 1.3 million were reported as earning wages below the minimum.2 Together, these 1.7 million workers with wages at or below the minimum made up 2.2 percent of all hourly-paid workers."

MY REPLY: The BLS study looks only at HOURLY-PAID workers (76.5 million) to get the 2.2%, and NOT ALL workers (146 million). 1.7m/145m = 1.17%.

 
At 1/23/2008 9:41 PM, Blogger Thomas Blair said...

Anon 4:23,

$8 additional pay per day is $2000/year, which is quite significan for people with low incomes.

Reducing it to the small-sounding figure of "only" $8 per day doesn't erase the fact that it's ~20% more than MW. One could just as easily frame it as: "what good is a mere 1.4 cents extra per minute?" I mean, what can 1.4 cents buy? Well, over a year, it's a hefty 2 grand.

 
At 1/23/2008 10:16 PM, Anonymous Anonymous said...

Here is a better question to ask - of the people making minimum wage, what percentage are teenagers? What percentage are full time students? What percentage have income supplemented by tips?

The stats are out there. Here are some points from the 2005 data:

- over 1/2 of minimum wage or lower earners were under age 25
- over 1/4 of MW or lower earners were under age 20
- Never married workers were far more likely to earn minimum wage.
- Part-time workers were 6 times as likely to earn minimum wage
- 3/5 of workers earning MW or lower were in the food services / drinking places and had income supplemented by tips not included in hourly wages
You can read about that info here:
http://www.bls.gov/cps/minwage2005.htm

Think about those for a bit and see if you have the same opinion...

 
At 1/23/2008 11:59 PM, Anonymous Ian Random said...

I find it funny that the left is so critical of the minimum wage as not lifting people out of poverty. But they never pat themselves on the back for their welfare programs as helping those same people. I guess that's the same reason that welfare benefits aren't counted in the poverty rate.

 
At 1/24/2008 9:42 AM, Anonymous Machiavelli999 said...

what jobs?,

I live in Cleveland, OH. Not exactly a boom town. All people do around here is complain about the factory jobs that have left. However, they don't talk about the fact the area is boomign with new healthcare businesses and has a high demand for education workers. In fact, there was an article very recently about the growth of high paying jobs in Northeast Ohio in the Cleveland Plain Dealer

(http://www.cleveland.com/news/plaindealer/index.ssf?/base/cuyahoga/120116707430070.xml&coll=2&thispage=2#continue)

The paper admits that the blue collar, manufacturing jobs have left and will likely never return. However, in their place there have emerged high paying jobs in the field of healthcare and education. The problem is there is a shortage of skilled workers to fill these positions, because the factory workers who have lost their jobs spend more time complaining then looking to gain new skills through training.

A National City economist states, "The New Economy demands higher skills. And team NEO's report underscores the widely held belief that "education pays," DeKaser said.

 
At 1/24/2008 9:45 AM, Anonymous machiavelli999 said...

And by the way, I just wanted to add that "education" does not mean going to an expensive 4-year university. It can mean going to a trade school and getting a 2 year degree. Or getting computer training at a community college. All of this improves your income potential and your chances of landing a job. If you feel you shouldn't have to go through this then sorry thats your fault. Your skills are no longer in demand. You can complain or you can do something about it.

 
At 1/24/2008 3:41 PM, Blogger Tom Davis said...

I am one of those workers who receives less than $5.15 hourly pay. But I don't depend on my pay rate to pay my bills. I'm a waiter. My income is dominated by tips.

The hourly rate is so unimportant to me that I don't even know what it is, just that it is somewhere around $4 per hour (in NYC, the federal minimum for tipped employees is a little less than $3). On the other hand, I would not consider working at an establishment which paid more than minimum as that would be a pretty obvious indication that I shouldn't expect too much in the ways of tips (many hotels without a local customer base pay more than minimum, no dance clubs do).

I wonder how many of those people in the stats are like me, hourly workers whose pay is actually much higher because of tips. The report states "Nearly three in four workers earning $5.15 or less in 2006 were employed in service occupations, mostly in food preparation and service jobs," and "For many of these workers[3/5ths of all workers receiving less than minimum who are in the hospitality and service industry], tips and commissions supplement the hourly wages received.," which seems to support a position that very likely most of the less than minimum wage earners are actually tipped employees whose hourly rate is not a serious factor in their choice of occupation or employer.

If you were to remove tipped employees from the stats, it seems likely that somewhat less than 1 percent of people are actually making minimum wage.

 
At 1/25/2008 11:27 AM, Blogger juandos said...

Gee! Look at all the whiners who think the minimum wage or the minimum wage plus a couple of bucks is to low....

So I ask these whiners, what have YOU all done with YOUR money to help these supposedly poor people?

Minimum Wage Socialism

Communism may be dead, but socialism is alive in the many forms of government intervention we see daily in the marketplace.

One widely accepted policy — the minimum wage — is appropriately reflected in Karl Marx's dictum, "To each according to his needs, from each according to his ability."

 
At 1/25/2008 4:44 PM, Blogger juandos said...

"If you live in Hillman, Michigan, you're lucky if you can even find a job, let alone one that pays decently. Are you supposed to give up your family to search for these "better paying jobs" that apparently are just there for the taking?"...

Why not? Mexicans do it all the time to the tune of what 12 million wetbacks in this country...

"Get off your high horses and be grateful that you aren't struggling and have to decide this week if you are going to eat or get your medication"...

So you made some very questionable life decisions and now its what? Someone else's fault?

 
At 11/06/2009 2:42 AM, Blogger Padmanaban said...

High paying jobs are most important in the current economic situation. Most of the companies are developing in India and there are lots of jobs in chennai and in various indian cities, which provides high salary.

 

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