Minimum Wage Going Up – If You’re Lucky

So, the next phase for the minimum wage hike is set for July 2009.  Right around the corner.  And this might seem like good news, heck, even in my own household I’m told this is a good idea.  To which I reply “The real minimum wage is $0.00.”  See, if you don’t have a job, you don’t get paid.  Which brings me to the point of it all I guess.  Or, rather, what should be the point.  See, government is really really bad at setting expectations, conducting data driven analysis, implementing a solution and then tracking that solution for results.  Heck, even private industry is generally bad at this, but really, government is horrible.  The reason?  It’s easier to manufacture spin than it is to demonstrate results.  Spin is easy.  Results are hard.  One gets you elected, the other gets the other guy elected.

So, let’s take minimum wage.  Let’s see if we can’t try to:

  1. Identify what we are trying to accomplish.
    1. Or, perhaps, more specifically WHO were are trying to help or assist.
  2. Identify some metrics that we can use to study data and later, measure results.
  3. Get some data, run some analysis.
  4. Since we have already implemented this policy, we’ll skip the whole “should we implement it” phase.
  5. Go back and see if the policy has worked.

Alright, so, let’s see if we can work to identify what we are trying to accomplish with a minimum wage law.  In my search, I found this, a study entitled “The Who and Why of the Minimum Wage” from The Economic Policy Institute.  The EPI is a liberal economic think tank; imagine Cato or Heritage for the Democrats. Right away we are given a hint of a possible metric:

Raising the wage floor is an essential part of a strategy to support working families.

Now, I’m going to clarify here.  All families, ALL of them, are working families.  While I don’t make the minimum wage, nor does my wife, I would take umbrage with anyone who tried to claim that ours is not a working family.  Yet, somehow, I understand from this study that mine is not the family we are trying to “support”.  The author is trying to support the poor or near poor, working family.  So, alright, we have a start.   We want to increase the income of the families, or people, who make the minimum wage.

To be clear, the authors do devote a significant portion of the study to those making more than the minimum wage, they do claim that the minimum wage is only a start.

Moving on to bullet #2 we need to see if we can identify a metric that we can use.  That would be something that would be able to give us an idea as to where we are now and then compare it to after we have implemented our change.  For me, one metric that jumps right out is the Annual Income of the target population.  So, we have as a metric “Annual income of people who made minimum wage before the increases of that minimum wage went into affect”.  If the law works, that metric should go up.  If it didn’t work, that metric would go down.

The third bullet point is what they always skip, and since they did, we can’t recreate it here.

So now we move on to number 5.  Let’s see if the policy worked.  Here we go!

First task, who earns the minimum wage?  Let’s check.

  • 2.2 million workers with wages at or below the minimum made up 3.0 percent of all hourly-paid workers.
  • Workers under age 25 represented only about one-fifth of hourly-paid workers, they made up half of those paid the Federal minimum wage or less.
  • About 7 in 10 workers earning the minimum wage or less in 2008 were employed in service occupations, mostly in food preparation and serving related jobs.
  • The industry with the highest proportion of workers with hourly wages at or below the Federal minimum wage was leisure and hospitality (about 14 percent). About three-fifths of all workers paid at or below the Federal minimum wage were employed in this industry, primarily in the food services and drinking places component. For many of these workers, tips and commissions supplement the hourly wages received.

Do you know what this means?  This means that A). Very very few people make the minimum wage. B). Those that do are young.  And C). A large portion of minimum wage or less earners are bringing in tips.

As an aside, I used to tend bar, at one point I did it for a living.  When I did, I would calculate an annual “salary” based on wage and tips adjusting for taxes [that I didn’t pay on tips].  Every year I brought in more than 40K.  Often I was making better than 44k.  And this did not include the added benefit of eating most meals at the restaurant as well as a significant discount on my “liquid” needs.  While I didn’t have health insurance provided, I was young and in good health; though I did smoke and did work in a smoky environment.

Needless to say, in 2008, the vast vast majority of workers in America did not make the minimum wage.  While the numbers above reflect the 2008 year, as recently as 2005, 67% of teens and young adult making the minimum wage:

  • Worked part time jobs – Again, I worked a part time job in school, high school and college.  In each case, I was paid the minimum wage at the time.
  • Had average family incomes of 64k.

Folks, I get the fact that we wanna help people who are struggling, but the facts is the facts; almost everyone makes more than the minimum wage.

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