How many people actually earn the minimum wage?

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In summary, the speaker identifies as a libertarian and often gets into disagreements with others due to their minority viewpoint. The main point of contention is government intervention in economic policies, with arguments being made about the power dynamics between employees and employers. The speaker often questions the validity of these arguments, citing statistics that show a small percentage of workers actually make minimum wage and many of them work in the service industry where tips are also factored in. The speaker also shares an article by an academic economist that highlights the misconceptions about the proportion of workers earning minimum wage.
  • #1
Economist
As you've probably noticed I'm generally a critic of most forms of government intervention in both peoples' personal lives and their economic lives. I guess that's what makes me a libertarian.:smile: Many times this point of view causes me to get in disagreements, discussions, arguments, debates, or whatever you want to call them with others, partially because my position is in the minority, and therefore others often disagree with me. I guess you could say I'm a "radical."

Often times these discussions/debates center around economic policy/regulation. (I guess I rarely get in arguments about liberty in regards to personal views, because a lot of folks probably share many of my ideas about invidual/personal/social freedom and liberty.) The person on the other end of the discussion often states something like the following, "Look, one reason we need government to intervene in our economic system is because employees and employers don't have the same power and therefore don't have the same bargaining position. Therefore, the workers will usually get screwed over when making deals with their superiors. One way to solve this problem is by giving employees some additional bargaining power, or by taking some away from the employers."

I'll admit, the argument sounds plausible. In effect, the person has just stated a theory. And we could derive (and then test) a hypothesis that's congruent with this theory, that states, "many employees would pay less than the minimum wage if it were legal, and therefore the minimum wage raises the wages of many workers." If this hypothesis was true, we would also expect that many individuals would earn exactly the minimum wage, because there's no reason for the employers to pay more than minimum wage (after all, they're already obeying the law, and as many have pointed out business owners, managers, etc are self-interested (some might say greedy)). Therefore, one hypothesis that comes from this plausibe theory is "many people will earn the minimum wage." Since it is a hypothesis, we don't really know whether it's true or not, and therefore we need to test it.

I have often asked many of the people I'm debating with, "If businesses are so powerful and have so much control over peoples wages, then why do so few people make minimum wage?" The funny thing, is that I've asked this question about 5 - 10 times on my short time on this forum, and I can't remember anyone actually answering it. Nobody's even took a stab at it, by trying to explain how this could be (although it does put a dent in their theory).

I was just reading an blog article on the minimum wage. The writer of the blog is an academic economist, and just out of personal curiosity he often surveys his students and people he gives presentations to, asking them "what percentage of the work force makes the minimum wage?" The median survey result is that 20% of the work force makes the minimum wage, in reality the number is closer to 2.2% (that's a big difference). Interestingly, approximately 98% of the work force earns above the minimum wage. Furthermore, of the small percentage of people who actually make the minimum wage, approximately 75% of them work in the service industry, meaning that a good chunk of them earn tips. Minimum wage earners make up a very small proportion of the work force, and the average minimum wage earner's "take-home" wage is probably above the minimum wage.

I attached the blog articles below so you won't have to go to the website (cafehayek):

I often ask students or people attending my lectures to guess the proportion of the US work force that earns the Federal minimum wage or less. The median guess is usually around 20%. In 2006 (the latest numbers available), the BLS reports that the answer was 2.2%:

According to Current Population Survey estimates for 2006, 76.5 million American workers were paid at hourly rates, representing 59.7 percent of all wage and salary workers.1 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. Tables 1-10 present data on a wide array of demographic and socioeconomic characteristics for hourly-paid workers earning at or below the Federal minimum wage. The following are some highlights from the 2006 data.

Minimum wage workers tend to be young. About half of workers earning $5.15 or less were under age 25, and about one-fourth of workers earning at or below the minimum wage were age 16-19. Among employed teenagers, about 8 percent earned $5.15 or less. About 1 percent of workers age 25 and over earned the minimum wage or less. Among those age 65 and over, the proportion was about 2 percent. (See table 1 and table 7.)


About 3 percent of women paid hourly rates reported wages at or below the prevailing Federal minimum, compared with under 2 percent of men. (See table 1.)


About 2 percent of white, black, and Hispanic hourly-paid workers earned $5.15 or less. Among Asian hourly-paid workers, about 1 percent earned the Federal minimum wage or less. For whites, women were twice as likely as men to earn $5.15 or less. (See table 1.)
Because this is only for workers who are paid hourly, the actual proportion is probably much lower than 2.2%.

And this does include some illegal immigrants These numbers are taken from the CPS that tries to capture a representative sample of all residents. Of course, it may not capture illegal immigrants precisely—I'd assume illegal immigrants try and find ways to avoid be surveying out of a general nervousness that it could lead to being caught.

Pretty amazing, isn't it. Over 97% of hourly workers make more than the law requires. How can that be? One answer is state minimum wage laws that require payment above the federal minimum wage. Thirty-two states require paying more than $5.15 per hour. That leaves 18 states where it's legal to pay $5.15 an hour. What is the proportion of workers in those states earn $5.15 or less?

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.

Some people seem to have misunderstood the point about this post on minimum wages. The point was simple. A lot of people I speak to, not just "regular" students, but legislators and journalists who I sometimes teach, think that only regulations or unions keep businesses from exploiting workers. They are shocked to discover that less than 10% of the private work force is unionized and that somehow, most workers, something over 96%, maybe closer to 99%, manage to make more than the minimum. Usually half of these groups when I survey them think that at least (at least!) 20% of the work force earns the minimum wage or less and that only legislation keeps it from being lower. But legislation turns out to be relatively unimportant compared to supply and demand—that is, competition. if you try to pay less than the going rate for the skills you want to hire, you can't attract workers.

Meanwhile, Tim Worstall points out something I missed:

Unfortunately, on the page he’s taken his information from he’s missed one thing which makes his case even stronger.

Nearly three in four workers earning $5.15 or less in 2006 were employed in service occupations, mostly in food preparation and service jobs.

That’s your waitron units and barkeeps folks. And what do we know about people who do these sorts of jobs? Well, perhaps you have to have actually done them (as I have, everything from the graveyard shift in a Denny’s to tending bar around the corner from this guy’s place): they all make tips. In fact, so much so that there is (or at least used to be when that BLS report was prepared) a special minimum wage for those in such jobs, one lower than the official Federal minimum wage.

For example, way back when, the min. wage was $3.35 an hour. Waiters got $2.01. You didn’t really care because even serving pancakes at 5 am you made another $25-$30 a shift ($50-$150 in a decent place). Barkeeps got $3.35 plus tips.

The BLS numbers are reporting what employers paid employees, not what people are actually earning. So we might in fact say that while the number being paid the minimum wage or less is 2.2% of the workforce, the number actually earning that figure is more like 0.5%.
 
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  • #2
Economist said:
I have often asked many of the people I'm debating with, "If businesses are so powerful and have so much control over peoples wages, then why do so few people make minimum wage?" The funny thing, is that I've asked this question about 5 - 10 times on my short time on this forum, and I can't remember anyone actually answering it. Nobody's even took a stab at it, by trying to explain how this could be (although it does put a dent in their theory).
The reason that most people do not earn minimum wage is because employers have to pay more to attract people with the skill sets they need. Supply and demand is another factor. I remember 20 years ago in Atlanta, there was such a shortage of unskilled labor that McDonalds was advertising starting pay at $9/hour for workers.

Perhaps people haven't bothered answering this because it is such a no-brainer.
 
  • #3
cafehayek said:
1 Of those paid by the hour, 409,000 were reported as earning exactly $5.15, the prevailing Federal minimum wage.
This would be more meaningful if it were the number of people earning the minimum wage in the state in which they work.
 
  • #4
In the UK 1.3 million workers rely on increases in the minimum wage for a pay rise. These are the same 1.3 million who were earning below the minimum wage when it was first introduced in 1999 in the face of frantic appeals by the employers' representatives, the CBI, who forecast dire consequences of businesses folding and unemployment rocketing if a minimum wage was introduced.

Not too surprisingly it transpired the CBI's concerns proved to be somewhat overstated with unemployment actually falling despite the minimum wage being increased by > inflation each year since it's introduction.

The UK's minimum wage currently stands at approx double that of the US's so perhaps the reason not so many people in the US are paid the minimum wage is simply because it is ridiculously low. Despite this 1.3% of the US population only earn the minimum wage compared with 1.8% (4.4% of the workforce) with a further 1.2% earning less than the minimum wage due to exemptions etc. in the UK and (contrary to what one would expect if France was the bastion of socialism some claim) France 16.8%. http://www.personneltoday.com/artic...e-is-double-us-rate-and-third-highest-in.html http://www.statistics.gov.uk/cci/nugget.asp?id=12
 
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  • #5
These types of discussions are just like Math: take a set of assumptions, work proofs against them and you always arrive at the same set of theorems (true statements).

So let's step outside and see what an assumption is like:
Depending on your ethics - your sense of right and wrong - do all able bodied people deserve a chance to feed and house themselves and their families? I say 'yes'. My opinion - or an operating assumption.

Libertarians essentially reject this notion - the free market solves all problems instead. To which I would answer 'visit India' where they do not have the above assumption. India does not have much of a middle class, and it is a great place to wheel and deal.

The issue with Economics as a discipline is that, like Math, you get out predictably what you put in your model. An example of this is the fact that many trained economists have very diverse views on the impact of something simple like tax reduction. If all of Economics were not dabbled with what I think are undeclared assumptions, then would this diversity of opinion persist? I think it would not.

This, by the way, is precisely what Evo said. It's a no-brainer. You get what you start with. Your undeclared assumptions direct your logic to a fore-ordained result. It's kinda like Calvinism for the investor class. Give it a rest.
 
  • #6
Evo said:
The reason that most people do not earn minimum wage is because employers have to pay more to attract people with the skill sets they need. Supply and demand is another factor. I remember 20 years ago in Atlanta, there was such a shortage of unskilled labor that McDonalds was advertising starting pay at $9/hour for workers.

Perhaps people haven't bothered answering this because it is such a no-brainer.

I agree with your first paragraph, but the second one is doubtful. The exact people I ask the question to say that wages are mainly determined by corporate power and greed. I agree with your statement above that what determines wages is supply and demand (which is afterall my whole point).

jimmysnyder said:
This would be more meaningful if it were the number of people earning the minimum wage in the state in which they work.

I thought they did look at states? If they didn't then you bring up a valid point. Even then though, minimum wage workers make up a very small percentage of workers. And even then, it's almost always young workers who haven't accumulated much human capital, which is a big part of a reason why they are working at such a job.

Art said:
In the UK 1.3 million workers rely on increases in the minimum wage for a pay rise. These are the same 1.3 million who were earning below the minimum wage when it was first introduced in 1999 in the face of frantic appeals by the employers' representatives, the CBI, who forecast dire consequences of businesses folding and unemployment rocketing if a minimum wage was introduced.

Not too surprisingly it transpired the CBI's concerns proved to be somewhat overstated with unemployment actually falling despite the minimum wage being increased by > inflation each year since it's introduction.

The UK's minimum wage currently stands at approx double that of the US's so perhaps the reason not so many people in the US are paid the minimum wage is simply because it is ridiculously low. Despite this 1.3% of the US population only earn the minimum wage compared with 1.8% (4.4% of the workforce) with a further 1.2% earning less than the minimum wage due to exemptions etc. in the UK and (contrary to what one would expect if France was the bastion of socialism some claim) France 16.8%. http://www.personneltoday.com/artic...e-is-double-us-rate-and-third-highest-in.html http://www.statistics.gov.uk/cci/nugget.asp?id=12

Do you doubt that the minimum wage made it more difficult for people to find work? Sometimes the unemployment rate might not tell the whole story. For example, by making low skilled jobs more attractive, the competition for such jobs has increased. This often leads to many displaced low skilled workers, because middle skilled workers will now strive after those jobs (because they're more attractive). This generally has disproportional adverse effects on groups of people who tend to be low skilled, such as, uneducated workers, poor people, young workers, and minorities. In other words, you may have changed the composition of the average minimum wage earner (or put differently, the unemployment rate may not have changed much, although the composition of those umemployed may have changed).

This is a pretty informative article on minimum wage (and Earned Income Tax Credit) in the US: http://www.epionline.org/studies/epi_eitc_05-2004.pdf

By the way, I do agree with you that often times certain people/groups will overstate the degree to which minimum wage legislation will increase the official unemployment rate. I'm not sure whether they do this because of a miscalculation or more intentionally due to a political reason/agenda (although I'd guess it's the latter, but maybe I'm mistaken). My whole point is that unemployment rates probably don't capture the whole story when it comes to the adverse effects of minimum wage legislation.

jim mcnamara said:
Libertarians essentially reject this notion - the free market solves all problems instead. To which I would answer 'visit India' where they do not have the above assumption. India does not have much of a middle class, and it is a great place to wheel and deal.

I don't know any libertarians who actually understand economics, and say "The free market solves everything!" What they do say is that it does a better job at problem solving than government, due to better incentives, more flexibility, dispersed knowledge, and decentralized decision making. They also say that we should be skeptical about the powers that government possesses, because as history has shown centralized power in the hands of few often leads to disastrous consequences. However, this is not the point of this thread, so I do not wish to discuss it. If you'd like to continue discussing this, start another post and I will be sure to read and respond to it.

My understanding is that India is not the most free-market place. In fact, I heard it takes an extremely long time for government to grant people permits, licenses, etc, to open up small businesses. With that said, I'm also under the impression that they are becoming increasingly more capitalistic, and that this has lifted millions of people out of poverty. Again though, that is not exactly the point of this thread.

jim mcnamara said:
The issue with Economics as a discipline is that, like Math, you get out predictably what you put in your model. An example of this is the fact that many trained economists have very diverse views on the impact of something simple like tax reduction. If all of Economics were not dabbled with what I think are undeclared assumptions, then would this diversity of opinion persist? I think it would not.

Actually you're missing a key element. Economics is a positive science, meaning we try and explain how things are as opposed to what should be. A big reason that people have such different opinions is because in order to forumulate an opinion you generally have to include normative judgements (or if you prefer the term, value judgements). It is very common that two economists will share the same positive outlook but very different normative outlooks. For example, two economists may believe that increases in the minimum wage increase unemployment. However, one economist may believe that we should still support minimum wage legislation because the gain to the winners is more important than the losses to the losers. The other economist may believe that it is not the governments place to decide how much employers should pay employees. Again notice the stark distinction, they share the same positive outlook on the outcomes of a minimum wage hike on umemployment, yet their value judgements and policy perscriptions are completely different.

By the way, there is still a lot of debate in economics over the positive aspects of "what is." That should not be suprising considering that all sciences have debates over positive aspects, and in fact, the only way the science advances is through this sort of process. However, there is generally more agreement over the positive aspects than there is disagreement over the positive aspects (at least in microeconomics).

jim mcnamara - I think you bring up many good points, but they just seemed off topic for a discussion on the minimum wage. I just want to keep the discussion focused on the minimum wage, at least temprorarily and then we can come back to these other issues. Or if you prefer we could start a new thread and discuss them there.
 
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  • #7
Economist said:
I thought they did look at states?
The line I quoted said specifically, 409,000 people earn $5.15, the federal minimum.
Here is a site that explains why the number is meaningless. And therefore the 2.2% percent figure that goes with it is also meaningless.
http://www.dol.gov/esa/minwage/america.htm"
 
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  • #8
jimmysnyder said:
The line I quoted said specifically, 409,000 people earn $5.15, the federal minimum.
Here is a site that explains why the number is meaningless. And therefore the 2.2% percent figure that goes with it is also meaningless.
http://www.dol.gov/esa/minwage/america.htm"

I don't know if I'd go as far as to say they're "meaningless." Besides even in the states with a minimum wage below $5.15 an hour (which includes 18 states) over 96% of the states population earns above $5.15 an hour. Here, I attached that part again below.

Pretty amazing, isn't it. Over 97% of hourly workers make more than the law requires. How can that be? One answer is state minimum wage laws that require payment above the federal minimum wage. Thirty-two states require paying more than $5.15 per hour. That leaves 18 states where it's legal to pay $5.15 an hour. What is the proportion of workers in those states earn $5.15 or less?

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.
 
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  • #9
This is such BS. "More than minimum wage" can mean 1 cent more. When the minimum wage over here was $7.50, I was making $8.00. Guess what? That's still not enough to make a living.
 
  • #10
Poop-Loops said:
This is such BS. "More than minimum wage" can mean 1 cent more. When the minimum wage over here was $7.50, I was making $8.00. Guess what? That's still not enough to make a living.

What's your point? If an employer didn't have to pay you 1 cent more, than why would they? Or in your case, if your employer didn't have to pay you 50 cents more, than why would they?

The point is, wages are determined by supply and demand. In other words, neither you nor your employer really "choose" the wage (just like neither you nor Safeway really "choose" the price of bread). Therefore, all these claims about business power and corporate greed being responsible for low wages is the real BS.

The truth is, if people are low paid, it's generally because they are low skilled, and therefore, others don't really value their skills and productivity very highly. It may be sad, but there's not a lot anyone (even government) can do about that fact. Furthermore, many of these low-skilled people are on their way up to higher paying jobs, because often times they are investing in their human capital (either through education, on the job training, or plain-old work experience).
 
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  • #11
Originally Posted by Economist
Do you doubt that the minimum wage made it more difficult for people to find work?
Sometimes the unemployment rate might not tell the whole story. For example, by making low skilled jobs more attractive, the competition for such jobs has increased. This often leads to many displaced low skilled workers, because middle skilled workers will now strive after those jobs (because they're more attractive). This generally has disproportional adverse effects on groups of people who tend to be low skilled, such as, uneducated workers, poor people, young workers, and minorities. In other words, you may have changed the composition of the average minimum wage earner (or put differently, the unemployment rate may not have changed much, although the composition of those umemployed may have changed).

This is a pretty informative article on minimum wage (and Earned Income Tax Credit) in the US: http://www.epionline.org/studies/epi_eitc_05-2004.pdf
I disagree entirely with your speculation. The minimum wage level is set far too low to attract skilled workers into unskilled jobs which as I pointed out in another thread they probably wouldn't get anyway and the unemployment figures back up the contention a minimum wage is not bad for the economy. Whichever way you cut it lower unemployment which equates to a smaller pool of unemployed workers means more unskilled people are finding jobs unless you're suggesting the skilled workers were the majority of the unemployed which in this day and age of ever higher skilled jobs doesn't make a lot of sense.

The article you quote makes some rather nonsensical assertions to arrive at it's conclusions. It assumes all income coming into a household is pooled and so individual incomes are irrelevant, How many households do you know that operate like this? Seems like a very left-wing communist style assumption to me. Personally I see each person as standing on their own. An eighteen year old trying to put himself through college is not going to be satisfied to work for a pittance because his parents happen to be well paid. At least not unless his parents give him their PIN no and bank card :biggrin:
Why not extend this principle so if your neighbour is well off then it is okay to pay you a pittance or why not if you know anybody who earns a decent wage then you can have a pittance.

The article is also self-contradictory. It goes to great lengths to say how few people need or are affected by the minimum wage and yet it is on a crusade to abolish it. Why?? If it's an irrelevancy then why does it need abolishing??

It also makes totally fabricated (or just incredibly mis/uninformed) claims such as
While the weight of economic evidence clearly shows that minimum wage hikes decrease employment, a small number of studies published in the mid-1990s purported to find no job loss from a minimum wage increase. The most widely cited study of this type, by Drs. David Card and Alan Krueger, actually found an increase in employment — something that cannot be explained with standard economic theory.
Duh! only unexplainable if your knowledge of economics doesn't extend to the most basic models such as the multiplier effect. In fact increasing the income in the lowest income groups is the best possible way to stimulate domestic economic growth as they are more likely to spend their income on necessaries produced locally rather than on luxury items imported from abroad.

Which btw is why if you want to stimulate the economy you get a far bigger bang for your buck if you reduce taxation for the lowest paid rather than the highest paid. $50,000 shared between lots of the lowest earners and spent in their local shops and on local services does a lot more for the economy than one top earner buying himself a BMW!
 
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  • #12
Economist said:
What's your point? If an employer didn't have to pay you 1 cent more, than why would they? Or in your case, if your employer didn't have to pay you 50 cents more, than why would they?
I'll answer that one. It's for marketing reasons. Employers are worried their brand and reputation will suffer if they are classed as minimum wage employers. If there was no minimum wage they wouldn't have to worry about that and could pay less. When a minimum wage was introduced in Ireland a major corporation I worked for gave all their operatives a pay rise to bring their hourly rate a few cents over the minimum for that very reason.
 
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  • #13
I disagree about corporate greed. I think if CEO and senior executive golden parachutes were not so huge all workers could be paid more or that money could be reinvested into the business (not the individual) and that would likely result in growth and the opportunity to pay workers more.
 
  • #14
Economist said:
I don't know if I'd go as far as to say they're "meaningless.".
I would. Here in NJ, the minimum wage is $7.15. We don't contribute to the numerator in the 2.2% figure, but are still found in the denominator. That makes the figure quite meaningless.
 
  • #15
Art said:
I disagree entirely with your speculation. The minimum wage level is set far too low to attract skilled workers into unskilled jobs which as I pointed out in another thread they probably wouldn't get anyway and the unemployment figures back up the contention a minimum wage is not bad for the economy. Whichever way you cut it lower unemployment which equates to a smaller pool of unemployed workers means more unskilled people are finding jobs unless you're suggesting the skilled workers were the majority of the unemployed which in this day and age of ever higher skilled jobs doesn't make a lot of sense.

Walter Williams points out that employment rates used to be similar between yound african americans and young whites, even going back to times with much more racism and discrimination. He then points out how the difference between the unemployment rates of these 2 groups changed with hikes in minimum wage laws. I don't know if the unemployment figures captured any of this considering that you probably have some people who weren't looking for jobs who were after the hike. Likewise, you'll also have discouraged workers who won't be looking for jobs because they're unlikely to get them. Walter Williams also points out the ways in which minimum wage laws were used during Aparteid in South Africa, precisely by white unions to make low skilled blacks less employable.

How exactly does what you're saying explain this?

By the way, I'm not saying all kinds of highly skilled workers would flow to low skilled jobs because of the minimum wage. All I'm saying is that some workers on the margin probably would.

Art said:
It also makes totally fabricated (or just incredibly mis/uninformed) claims such as Duh! only unexplainable if your knowledge of economics doesn't extend to the most basic models such as the multiplier effect. In fact increasing the income in the lowest income groups is the best possible way to stimulate domestic economic growth as they are more likely to spend their income on necessaries produced locally rather than on luxury items imported from abroad.

My understanding is that there is still some debate over the significance of the multiplier effect. Essentially, the money has to come from somewhere in the first place (namely taxes) and therefore what would have been spent by one group is transferred for another group to spend. This also misses the fact that some people who are taxed more might work less because their marginal tax rate has increased. Not to mention, I don't know what buying abroad vs buying at home has to do with anything. Many economists have claimed that "trade deficits" are completely meaningless statistics. Not to mention even if "the poor" spent their money locally like you state, why wouldn't the next person just spend it on imports. Or even if someone spent the money on imports, who's not to say the foreigner would buy or invest in America. In other words, your speculation about the way that people would spend the money, and the results of such actions seem like they're unbacked.

Art said:
I'll answer that one. It's for marketing reasons. Employers are worried their brand and reputation will suffer if they are classed as minimum wage employers. If there was no minimum wage they wouldn't have to worry about that and could pay less. When a minimum wage was introduced in Ireland a major corporation I worked for gave all their operatives a pay rise to bring their hourly rate a few cents over the minimum for that very reason.

Could be. But maybe it's for other reasons as well. I mean, my mom works at JCPenny's and she makes minimum wage. Are you saying that JCPenny's doesn't care about it's reputation? It seems that your analysis is probably an ad hoc explanation, and lacks predictive power. Besides, how much above the minimum wage to you pay for this image? 1 cent, 50 cents, 1 dollar, 5 dollars?

You're also forgetting that some of the literature on the minimum wage states that companies actually will pay some people higher wages if there is a minimum wage. Essentially though, this literature says it will not make the lowest skilled people better off, but rather the people slightly above them. For example, if you have a low skilled/productive worker that you can hire for $5 and a medium skilled/productive worker that you could hire for $10, you might hire the low skilled and you might hire the mid skilled (it depends on the situation). But if there's a minimum wage of $8, you're much more likely to hire the middle skilled/productive worker. Essentially, minimum wage legislation actually might make some peoples wages rise, however it will likely make other (lower skilled, less educated, poorer) people unemployable.

Amp1 said:
I disagree about corporate greed. I think if CEO and senior executive golden parachutes were not so huge all workers could be paid more or that money could be reinvested into the business (not the individual) and that would likely result in growth and the opportunity to pay workers more.

The reason companies have "golden parachutes" is because it can actually be cheaper in many circumstances. CEOs will leave without as much fuss if they are compensated to leave. If you don't have "golden parachutes" you'll have a lot more lawsuits and what not. In other words, companies are still acting in there self interest by providing these "golden parachutes."

More importantly, what CEOs are paid has nothing to do with what employees are paid. If companies quit offering golden parachutes, or decided to pay CEOs less (or even if they were required to by law), you wouldn't see employees salaries rise. The two things are completely unrelated. This is like saying Safeway would drop prices if their rent was dropped (which is not true). Why would they? They are charging the price of food which maximizes their profits, and a change in rent would not affect this profit maximizing price (for those of you who've taken some econ, it comes down to difference between marginal cost and fixed cost). If I gave you $50,000, would you go to work tomorrow and tell your boss you're willing to work for less? If a company saves $1 million dollars on a CEO, why would they turn around and give this money to their employees? Why not just keep it for themselves?

jimmysnyder said:
I would. Here in NJ, the minimum wage is $7.15. We don't contribute to the numerator in the 2.2% figure, but are still found in the denominator. That makes the figure quite meaningless.

Ok, so you're saying that in NJ the amount of people earning the state minimum wage of $7.15 is much greater than 2.2%. Want to wager a guess on how high the number will be in NJ?
 
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  • #16
Economist said:
Ok, so you're saying that in NJ the amount of people earning the state minimum wage of $7.15 is much greater than 2.2%. Want to wager a guess on how high the number will be in NJ?
I didn't say that. I don't know what the figure would be. But when I got to that part of the article I knew that it was ill considered and I stopped reading it.
 
  • #17
jimmysnyder said:
I didn't say that. I don't know what the figure would be. But when I got to that part of the article I knew that it was ill considered and I stopped reading it.

I would be willing to bet that minimum wage earners probably don't make up 5% of the employees in any state. I seriously would be willing to bet on this (which obviously doesn't mean I'm right). This is not the first article I've read that pointed out how small of a proportion minimum wage earners make in our economy. Furthermore, some of these studies are more likely to overestimate the percentage of people earning a minimum wage because many employees are on salary (and it's even more rare to find salary employees who have a wage that is that low).
 
  • #18
jimmysnyder said:
I would. Here in NJ, the minimum wage is $7.15. We don't contribute to the numerator in the 2.2% figure, but are still found in the denominator. That makes the figure quite meaningless.

The article later quotes the statistic for states without higher than federal minimum wage.

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.
 
  • #19
I think a mandated minimum wage is almost meaningless other than being a reference point. It's simple to me, if a job pays too low, don't work there. If a job position doesn't get applicants it has to raise it's wage until it does. If we tripled (for example) the minimum wage, what would that do? It would shut down entire industries. It would reward people NOT to advance their job skills and education. That's true evil in my opinion.

Noone with any skill, education, or common sense is going to stay at a job that pays minimum wage. You can't raise a family on it. You can hardly pay your mother rent if you live in her basement. Those positions are basically for kids to get experience at being employed somewhere. Or for elderly to supplement their income and have something to do.

Very few places offer minimum wage anyhow because people simply won't work for it.
 
  • #20
drankin said:
Those positions are basically for kids to get experience at being employed somewhere. Or for elderly to supplement their income and have something to do.

I think one of the reasons for keeping the minimum wage laws are to prevent exploitation of the young and elderly.
 
  • #21
NeoDevin said:
I think one of the reasons for keeping the minimum wage laws are to prevent exploitation of the young and elderly.

I pretty much agree with you. Provided the minimum is raised excessively it has it's usefullness in this regard.
 
  • #22
drankin said:
I pretty much agree with you. Provided the minimum is raised excessively it has it's usefullness in this regard.

I'm assuming you meant to say isn't?
 
  • #23
drankin said:
Noone with any skill, education, or common sense is going to stay at a job that pays minimum wage. You can't raise a family on it. You can hardly pay your mother rent if you live in her basement. Those positions are basically for kids to get experience at being employed somewhere. Or for elderly to supplement their income and have something to do.

Very few places offer minimum wage anyhow because people simply won't work for it.
There are a lot of people who because of their intellect/skills, their lack of education, or lack of socialization (even in the most labor-driven markets) that can easily be trapped in these jobs. The person cleaning grease-traps at a chain restaurant, the person returning shopping-carts from the parking lot to the chain store, and the person bagging your groceries at the supermarket may well have gotten to about their level of competence. Please recognize that these people deserve to make a wage that they can live on. They do the little things that make our society function and their service value is often exploited by their employers with no recompense. Wal-Mart recognized a long time ago that if you paid some elderly local people to glad-hand folks coming into the store that you could increase sales. Do you think that the "greeter" strategy was embraced to pull elders out of poverty?
 
  • #24
NeoDevin said:
I'm assuming you meant to say isn't?

Yep, oops. :redface:
 
  • #25
turbo-1 said:
There are a lot of people who because of their intellect/skills, their lack of education, or lack of socialization (even in the most labor-driven markets) that can easily be trapped in these jobs. The person cleaning grease-traps at a chain restaurant, the person returning shopping-carts from the parking lot to the chain store, and the person bagging your groceries at the supermarket may well have gotten to about their level of competence. Please recognize that these people deserve to make a wage that they can live on. They do the little things that make our society function and their service value is often exploited by their employers with no recompense. Wal-Mart recognized a long time ago that if you paid some elderly local people to glad-hand folks coming into the store that you could increase sales. Do you think that the "greeter" strategy was embraced to pull elders out of poverty?

Do you believe they are being exploited right now? If that's so, anyone who works for another is being exploited.

Am I getting paid as much as I'm worth, or as much as I'm capable and willing to work for? I know people more capable than I at what I do making less. And I know people less capable than I making more. It's up to the individual to accept their position.

Whos responsibility is it to "pull" another out of poverty?

Nobody deserves to make a living wage simply because they are breathing. (There are those that clinically cannot but our society has provision for them and that isn't what I'm talking about.) It is up to the individual to EARN a living wage. Nobody gets TRAPPED into a job. This isn't a communitst nation. You can chose NOT to work in a bad, low paying job.

If when I am an elder I'm living in poverty, that's my responsibility. I will have lived an entire life to prepare myself for it.

-BTW, my cousin-in-law cleans grease traps from restraunts and makes a six figure income. Believe it, or not.
 
  • #26
I'm not sure why there's so much focus on how many people earn minimum wage. Raising or lowering minimum wage affects more than those earning exactly the minimum wage.

It's the difference between current pay and the pay available to them somewhere else that determines how likely an employee is to stay in a certain job, not the actual wage they're making.

A minimum wage sets the floor for new hires. Even in low skilled jobs, experienced workers are better than new hires. You want to hang on to competent workers and will pay them enough above minimum wage that they won't move on to some other minimum wage job.

In other words, if the minimum wage is raised, it raises wages for those making just above minimum wage, as well. And, the rise in wages doesn't disadvantage the employer, either. If all of the competition has to raise their wages by the same amount, then all employers raise the price of their services/products by the same amount and no one gains an advantage or disadvantage (theoretically, at least, since any change will affect each employer a little differently in reality).

Of course, the end result is higher wages and higher prices and there's not much net effect on the quality of living resulting from the change in minimum wage.

The exception would be low-skilled manufacturing jobs. If minimum wage is raised in the US and the job can be done in some other country cheaper, then raising the minimum wage eliminated jobs and actually reduced the quality of life for folks earning near minimum wage.
 
  • #27
drankin said:
I think a mandated minimum wage is almost meaningless other than being a reference point. It's simple to me, if a job pays too low, don't work there. If a job position doesn't get applicants it has to raise it's wage until it does. If we tripled (for example) the minimum wage, what would that do? It would shut down entire industries. It would reward people NOT to advance their job skills and education. That's true evil in my opinion.

Noone with any skill, education, or common sense is going to stay at a job that pays minimum wage. You can't raise a family on it. You can hardly pay your mother rent if you live in her basement. Those positions are basically for kids to get experience at being employed somewhere. Or for elderly to supplement their income and have something to do.

Very few places offer minimum wage anyhow because people simply won't work for it.

Good points drankin. I also agreed with what you said later about people having to earn their living (in most cases). There's no free lunch.

NeoDevin said:
I think one of the reasons for keeping the minimum wage laws are to prevent exploitation of the young and elderly.

I don't know about this. How do we decide whether someone is being "exploited" or not? I get kinda irritated of that word because people always throw it around. I mean, the company says they are willing to pay a certain wage, and people have chosen to work there at that wage. It was voluntary, where's the exploitation? Have you ever considered the fact that they may want to work the job because they need the money and it's their best option? I'd hardly call that "exploitation."

On the other hand, if we're talking about people who aren't competent enough to make decisions for themselves, then that's another story. But in those cases, one must be logically consistent. If you claim that people over the age of 70 (or whatever) are not competent enough to enter into voluntary employment contracts. Then you should also say that these people cannot drive, buy clothes, buy groceries, walk the streets by themselves, etc, because they wouldn't be competent enough to do these things either. Then, I guess we'd have to do one of two things: 1) either require them to be in an retirement home or mental institute, or 2) give a relative the legal right to be their decision maker. Similarly, with children and the mentally ill, if we are saying they're not competent enough to enter into a voluntary employement contract, then they're also not able to make many others decisions for themselves without a "gaurdian." This obviously makes sense for young children, but it hardly seems to hold for children that are 16 who generally are allowed to drive and have a whole host of other responsibilities.

BobG said:
I'm not sure why there's so much focus on how many people earn minimum wage. Raising or lowering minimum wage affects more than those earning exactly the minimum wage.

It's the difference between current pay and the pay available to them somewhere else that determines how likely an employee is to stay in a certain job, not the actual wage they're making.

A minimum wage sets the floor for new hires. Even in low skilled jobs, experienced workers are better than new hires. You want to hang on to competent workers and will pay them enough above minimum wage that they won't move on to some other minimum wage job.

In other words, if the minimum wage is raised, it raises wages for those making just above minimum wage, as well. And, the rise in wages doesn't disadvantage the employer, either. If all of the competition has to raise their wages by the same amount, then all employers raise the price of their services/products by the same amount and no one gains an advantage or disadvantage (theoretically, at least, since any change will affect each employer a little differently in reality).

Of course, the end result is higher wages and higher prices and there's not much net effect on the quality of living resulting from the change in minimum wage.

The exception would be low-skilled manufacturing jobs. If minimum wage is raised in the US and the job can be done in some other country cheaper, then raising the minimum wage eliminated jobs and actually reduced the quality of life for folks earning near minimum wage.

You seem to have got a few things mixed up. Yes, minimum wages tend to raise the wages of those at, or slightly above the minimum wage, but at the expense of the lower paid/skilled (by making them less employable).

Furthermore, your last paragraph is flawed. It is true that manufacturing jobs are more likely to be outsourced given minimum wages. But your assumption that this industry is "unique" precisely because you can outsource to cheaper labor, misses the fact that substitutes for things are everywhere. For example, movie theatres used to have ushers to walk people to their seats. If the minimum wage was increased, they wouldn't be "stuck" because they can't outsource. This is because there are other substitutes, such as scratching the job altogether and letting people find their own seat. Likewise, if you own a gas station and hire someone to pump the gas, a raise in the minimum wage may lead you to decide that you will let people pump their own gas. Or imagine that you are a business owner and you have a team of 10 janitors, and the minimum wage increases. Well, now it maybe best to just keep 1 or 2 janitors and invest in expensive equipment/machinery/technology which allows them to do the job that used to require 10 janitors. Essentially, you are missing one of the fundamental principles of Econ 101, which is that (virtually) everything has substitutes!
 
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  • #28
I noticed that someone mentioned Wal-Mart in this thread. Someone else also said something about exploitation. Interestingly enough, Wal-Mart is often under attack for "exploiting" their workers.

Anyway, I read this, this morning and I wanted to share it with you guys.

Evil Wal-Mart by Russell Roberts

A lot of people think that when Wal-Mart comes to town, wages fall along with the quality of life. Wal-Mart jobs are low-paying which drains money from the community. Wal-Mart jobs don't have enough benefits along with the low wages. Wal-Mart jobs exploit workers because Wal-Mart workers aren't unionized.

Here are 7,500 arguments on the other side: http://www.ajc.com/services/content/metro/dekalb/stories/2008/01/08/walmart_0109.html?cxtype=rss&cxsvc=7&cxcat=13

From the Atlanta Journal Constitution:

They came in droves — high school students, retirees, young moms, the unemployed — all for a shot at a job at a new Wal-Mart on Memorial Drive in central DeKalb County.

In just two days, and with virtually no advertising or even any signs, a staggering 7,500 people filled out applications for one of the 350 to 400 available jobs.
 
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  • #29
Russell Roberts said:
Here are 7,500 arguments on the other side:
I wonder how many of the 7,500 were unemployed, and how many already had a job and were looking to get a better one.
 
  • #30
jimmysnyder said:
I wonder how many of the 7,500 were unemployed, and how many already had a job and were looking to get a better one.

Just out of curiousity, why do you think that's relevant?
 
  • #31
Economist said:
Just out of curiousity, why do you think that's relevant?
A starving man will clutch at any straw. I wonder if this article informs us how good Wal-Mart is, or how bad off the locals are.
 
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  • #32
Yeah, 7500 ppl wanting a Walmart job is... alarming. LOL
 
  • #33
Economist said:
Evil Wal-Mart by Russell Roberts

A lot of people think that when Wal-Mart comes to town, wages fall along with the quality of life. Wal-Mart jobs are low-paying which drains money from the community. Wal-Mart jobs don't have enough benefits along with the low wages. Wal-Mart jobs exploit workers because Wal-Mart workers aren't unionized.
This is not in the link you posted. This is nonsense, please post the link to this.

jimmysnyder said:
A starving man will clutch at any straw. I wonder if this article informs us how good Wal-Mart is, or how bad off the locals are.
The article was actually positive on Walmart, there are a lot of people that need these jobs.
 
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  • #34
Economist said:
You seem to have got a few things mixed up. Yes, minimum wages tend to raise the wages of those at, or slightly above the minimum wage, but at the expense of the lower paid/skilled (by making them less employable).

Furthermore, your last paragraph is flawed. It is true that manufacturing jobs are more likely to be outsourced given minimum wages. But your assumption that this industry is "unique" precisely because you can outsource to cheaper labor, misses the fact that substitutes for things are everywhere. For example, movie theatres used to have ushers to walk people to their seats. If the minimum wage was increased, they wouldn't be "stuck" because they can't outsource. This is because there are other substitutes, such as scratching the job altogether and letting people find their own seat. Likewise, if you own a gas station and hire someone to pump the gas, a raise in the minimum wage may lead you to decide that you will let people pump their own gas. Or imagine that you are a business owner and you have a team of 10 janitors, and the minimum wage increases. Well, now it maybe best to just keep 1 or 2 janitors and invest in expensive equipment/machinery/technology which allows them to do the job that used to require 10 janitors. Essentially, you are missing one of the fundamental principles of Econ 101, which is that (virtually) everything has substitutes!

I didn't say raising the minimum wage eliminated service jobs because service jobs are hard to evaluate. I'm sure raising the minimum wage eliminates some, especially at the smaller family businesses, but it's definitely not directly proportional. A 10% rise in minimum wage doesn't eliminate 10% of the minimum wage jobs because employers didn't carry 10% more employees than they needed just because they could afford it - they probably tried to carry the minimum number of employees they could get away with even before the wages rose.

Besides, did raising minimum wage really eliminate the guy that pumps the gas or was it the number of Jiffy Lubes that sprang up? Gas stations quit pumping gas about the same time they started losing oil changes and lube jobs. In other words, if there ever was a market for someone who only pumped gas, it was prior to the 1930's. They still didn't cut their number of employees. Now they have people that stay inside the building and sell twinkies and chips and those employees really are minimum wage employees vs the kid that might be working at minimum wage while he's still learning to change the oil, fan belt, etc.

And does a waitress at the Brown Derby really provide better service than a waitress at a Denny's? Why tip 15% at both restaraunts when the waitress at the more expensive restaraunt isn't doing any more work than the waitress at the cheap restaraunt? If a $3.00 on a $20 meal for two is good enough for a waitress at Denny's then a $3.00 tip on a $75 meal should be good enough for a waitress at Brown Derby! They're providing the exact same service even if the food is different. Talk about subjectivity in the value of service!

In fact, come to think of it, why take a date to a Brown Derby when you could just take her through the MacDonald's drive-through and never have to get out of the car? In fact, why take your date out at all when you can watch a video at home - especially considering the real theaters have been cut up into little boxes and there's no ushers anymore! In fact, why not just watch a DVD, call Domino's, and you and your date would never even have to get out of bed? Heck, I'd tip extra - up to a whole $3.30 - for delivery in bed, even more if they stopped by Blockbusters and picked up a movie for me!

It's just tough to evaluate the value of a service job that's as much about attracting customers as it is delivering some actual service. I pump your gas so I can check your oil and point out how dirty it is. You need an oil change and you ought to use a better oil filter, which is why your oil is so dirty after only 2,000 miles - you ought to be changing your oil every 3,000 miles anyway, you know, cause your owner's manual only said every 6,000 miles because they want the car to last past the warranty, but not so long that you die before you buy another car from them. And, man, these wiper blades are shot! Can you even see out your windows when it rains!? It was worth it to start pumping your own gas if only to escape being bombarded by the sales pitch every time you bought gas.
 
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  • #35
Economist said:
Walter Williams points out that [...]. He then points out how [...]. Walter Williams also points out the ways in which [...].
Unless you properly cite these stats, you are simply resorting to an appeal to authority. If you can't cite the stats, don't say the words!
 

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