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Minimum wage: Not about those already employed

English: Wage_labour

English: Wage_labour (Photo credit: Wikipedia)

The minimum wage is a fairly complex issue, and it’s been an issue that has been a little difficult to investigate quantitatively (for many reasons that I hope to get to in a future post). A lot of time is spent by proponents of raising the minimum wage on the plight of those working minimum wage jobs. And yes, a minimum wage job is not going to provide the income necessary to raise a family or buy a house or save for retirement. But, how severe is this problem? The answer is, not very:

The notion that there are millions of full-time workers struggling to raise a family, but are stuck in jobs paying the minimum wage for long periods of time is more myth than fact. Almost all full-time workers (99.4%) are earning more than the minimum wage, and almost all full-time hourly workers (98.3%) are earning more than the minimum wage. Most importantly, the fact that more than three out of four teenagers (77.2%), who are the least skilled and least educated group of workers, earned more than the minimum wage in 2011 would suggest the minimum wage is mostly an entry-level wage for beginning workers with no skills. The reality of the labor market is that even a large majority of previously unskilled teenage workers are earning more than the minimum wage as soon as they acquire minimal jobs skills and work habits, and can demonstrate their value to employers.

The minimum wage is not about people who are working minimum wage jobs. They, for the most part, are well on their way to earning more money. The few people who are forever stuck with minimum wage work are often also on Disability from SocSec. Very, very, very few people are going to be stuck in a minimum wage job, as their only source of income, their entire lives.

So, why not raise the minimum wage if it’s such a non-factor for people who are employed? because…

there are many unskilled workers who desperately need that first job that allows them to acquire the skills and experience that leads to higher wages as the teenage data demonstrate. But the minimum wage law prices many of those unskilled workers out of the labor market (especially minority populations), and they are denied the employment opportunities they desperately need (see cartoon above). The real tragedy isn’t that some full-time workers are initially earning $7.25 per hour and supposedly “living in poverty,” but that there are millions of unemployed Americans willing to work but are earning $0.00 per hour and living in poverty because of the minimum wage law.

Mark Perry even has a nifty graph showing the relationship between teenage employment and the minimum wage.

Everyone, at some point in their lives, had zero value to a potential employer. Some of us gained skills through school or through our parents. Some of us got lucky and got paid to screw up for six months before finally being worth a paycheck. A few of us even get trained by our employers. But the higher we keep pushing the minimum wage, the more it costs employers to train us. And eventually, employers are simply not going to provide those opportunities.

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