Minnesota’s Economic News – W/E 4/9/21
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How can anyone support a family on the minimum wage?
This question and variations of it are often used to advocate for increases in federal, state, and local minimum wages. But, as data from the Bureau of Labor Statistics shows, it is a misleading way to look at the issue.
First, very few workers actually earn the minimum wage. As the BLS puts it,
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.
Among workers who were paid hourly rates in 2017, about 3 percent of women and about 2 percent of men had wages at or below the prevailing federal minimum.
In Minnesota, less than 1% of hourly paid workers were earning at or below the minimum wage, one of the lowest rates in the United States.
Second, the number of workers earning the minimum wage is falling.
The percentage of hourly paid workers earning the prevailing federal minimum wage or less declined from 2.7 percent in 2016 to 2.3 percent in 2017. This remains well below the percentage of 13.4 recorded in 1979, when data were first collected on a regular basis.
Workers earning the minimum wage are young and unlikely to be supporting a family.
Minimum wage workers tend to be young. Although workers under age 25 represented only about one-fifth of hourly paid workers, they made up about half of those paid the federal minimum wage or less. Among employed teenagers (ages 16 to 19) paid by the hour, about 8 percent earned the minimum wage or less, compared with about 1 percent of workers age 25 and older.
These workers are less likely to be married.
Of those paid an hourly wage, never-married workers, who tend to be young, were more likely (4 percent) than married workers (1 percent) to earn the federal minimum wage or less.
Race doesn’t seem to be much of a factor in determining whether a worker earns the minimum wage or not.
The percentage of hourly paid workers with wages at or below the federal minimum differed little among the major race and ethnicity groups. About 3 percent of African American or Black workers earned the federal minimum wage or less. Among White, Asian, and Hispanic workers, the percentage was about 2 percent.
Minimum workers have lower levels of educational achievement.
Among hourly paid workers age 16 and older, about 4 percent of those without a high school diploma earned the federal minimum wage or less, compared with about 2 percent of those who had a high school diploma (with no college), about 2 percent of those with some college or an associate degree, and about 1 percent of college graduates.
Workers earning the minimum wage are more likely to be working part time rather than full time.
About 6 percent of part-time workers (persons who usually work fewer than 35 hours per week) were paid the federal minimum wage or less, compared with about 1 percent of full-time workers.
And, finally, they tend to be working in lower productivity sectors of the economy.
Among major occupational groups, service occupations had the highest percentage of hourly paid workers earning at or below the federal minimum wage, at about 7 percent. About two-thirds of workers earning the minimum wage or less in 2017 were employed in service occupations, mostly in food preparation and serving related jobs.
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.
The BLS data gives the lie to the notion that there are lots of breadwinners trying to raise families on the minimum wage, especially in Minnesota.
John Phelan is an economist at the Center of the American Experiment.