Who makes up the minimum wage workforce?
…Is perhaps the single most important question that needs to be answered if society is going to figure out the best way to help low-wage workers climb up the income ladder. Unfortunately, much of the minimum wage policy discussion rarely answers this question, leading to a lot of misguided policy prescriptions, such as minimum wage hikes.
As the data shows, however, the minimum and sub-minimum wage workforce makes up a small and declining share of the labor force. Moreover, minimum and sub-minimum wage workers tend to be young and low-skilled workers who could benefit more from upskilling than from minimum wage hikes.
The minimum wage labor force, 2019
According to the Bureau of Labor Statistics (BLS)
In 2019, 82.3 million workers age 16 and older in the United States were paid at hourly rates, representing 58.1 percent of all wage and salary workers. Among those paid by the hour, 392,000 workers earned exactly the prevailing federal minimum wage of $7.25 per hour. About 1.2 million had wages below the federal minimum. Together, these 1.6 million workers with wages at or below the federal minimum made up 1.9 percent of all hourly paid workers.
The percentage of hourly paid workers earning the prevailing federal minimum wage or less edged down from 2.1 percent in 2018 to 1.9 percent in 2019. This remains well below the percentage of 13.4 recorded in 1979, when data were first collected on a regular basis.
In 2019, workers under 25 made up one-fifth of hourly-paid workers. However, they made up about two-fifths of those paid the federal minimum wage or less. Among hourly paid teenagers (16 to 19), about six percent earned the minimum wage or less, compared with about one percent of workers aged 25 and older.
Minimum wage workers are generally low-skilled
When it came to education,
among hourly-paid workers age 16 and older, about 3 percent of those without a high school diploma earned the federal minimum wage or less, compared with 2 percent of those who had a high school diploma (with no college), 2 percent of those with some college or an associate degree, and about 1 percent of college graduates.
On top of that, minimum wage workers were also less likely to be married, more likely to be part-time workers, and concentrated in the leisure and hospitality industry in a service occupation.
Minimum wage workers make up a small share of the workforce
According to the data, minimum wage workers continue to make a small and declining share of the workforce, and that is mainly due to rising wages, driven by economic growth. The Wall Street Journal reported, for instance, that,
According to the Bureau of Labor Statistics Usual Weekly Earnings survey, most workers’ wages rose a bit more than 10% from December 2016 through December 2019, and those in the bottom 10% got a raise of 15.6%.
Unsurprisingly, while in 2010, minimum wage workers constituted six percent of all hourly-paid workers (4.4 million), in 2019, the number was just 1.9 percent (1.6 million). These estimates do not include tips, overtime pay, or commissions, which may substantially raise pay in some instances. The number of workers paid minimum wage or less is, therefore, likely much lower than 2 percent.
Ignoring facts leads to misguided policy
Proponents of minimum wage hikes argue that such policies as the “Raise the Wage Act” are necessary to raise the incomes of families. However, basic facts run contrary to that idea.
As the data shows, the minimum wage workforce is mainly made up of young, low-skilled, part-time workers, potentially in entry-level jobs, trying to gain experience. Additionally, minimum wage jobs are concentrated in low-productive sectors such as the hospitality industry, such that minimum wage hikes would likely raise costs for employers, killing jobs.
If indeed raising wages is the goal, championing pro-growth policies is an effective way to achieve that. Moreover, emphasizing upskilling could likely move low-skilled workers into more productive, high-wage industries without destroying jobs.