Originally posted on LinkedIn on March 7, 2021, Lightly updated on October 29, 2022.
Subtitle: Please, OHIO, do not pass the raise the wage act as a constitutional amendment.
Do you know how many workers are paid the minimum wage? How big is the problem?
In 2021 it was 1.091 million workers or 1.4 percent of the total wage and salary workers in the US (and less than 0.8 percent of all workers paid wage or salaried).
For nine years, I taught survey methods in a course then called Computer Skills for Economic Analysis. It featured lots of data work and programming leading to economic analysis. (It has since been remastered and renamed econometrics I required as core in the College of Business). One task was to have students update and administer a survey to at least 30 people, asking but not requiring them to try to survey a full age range of people (not just their same-age friends). What resulted was about 4,700 observations over the near-decade. It gave good practice in collecting and merging data and then analyzing questions.
Students and people are unrealistic and pessimistic
One thing that stood out was when we asked what was the unemployment and inflation rate; the answers were amazingly overstated. These were numbers that most people had no idea about, but when asked, they always tended to forecast worse than the actual rates and not by a few percentage points either. Pessimism seemed to reign, and students and respondents always leaned heavily toward the worst case.
The same is the case about whether the minimum wage should be raised, specifically how many people are affected by the minimum wage directly, that is, how many are paid at or below the minimum wage? I always found that even my class of economists overstated this number as well, and again not by a few percentage points.
Students saw being paid at or below minimum wage as a larger problem than it is. They saw the number of persons affected by minimum wage as a relatively large portion of the economy. And they didn’t correctly see the minimum wage as primarily being among the young, inexperienced, and uneducated.
Why they are so pessimistic is an important question not addressed here, but many in the media and political world do benefit from that pessimism.
What are the facts?
The answer to the question is in an annual report from the US Bureau of Labor Statistics, Characteristics of Minimum Wage Workers (the most recent report is for 2021 at https://www.bls.gov/opub/reports/minimum-wage/2021/home.htm (although the graph below was created on data for 2020 at https://www.bls.gov/opub/reports/minimum-wage/2020/home.htm).)
In 2021, after the COVID recession, fewer workers are paid at or below minimum wage, and they represent an even lower percentage of the total hourly workers than in 2020. (1.091 million and 1.4 percent). By the way, of the 1.091 million workers, only 181,000 were paid at the minimum wage, and 910,000 were paid below due to exceptions and carveouts in the law.
What else can we learn from the BLS report?
Of the 1.091 million workers paid hourly at or below the minimum wage
- 44.3 percent are 24 years or younger. (Table 1)
- 52.0 percent are part-time workers (Table 1)
- 52.8 percent are in the Southern states (Table 2)
- 73.7 percent are in Service industries (Table 4)
- 14.9 percent have less than a high school diploma (Table 6)
- 34.4 percent have a high school diploma and no college (Table 6)
- 27.2 have some college and no degree (Table 6)
- 8.8 percent have an Associate degree (Table 6)
- 12.3 percent have a Bachelor’s degree (Table 6)
- 65.0 percent are never married (Table 8)
- 16.4 percent are married, spouse present, and over 25. (Table 8)
In 2021, 76.1 million workers aged 16 and older in the United States were paid at hourly rates, representing 55.8 percent of all wage and salary workers. The percentages shown above are all based on hourly workers.
1.5 percent of hourly workers are paid at or below the minimum wage. This is the same as saying that 0.8 percent of all workers are paid at or below the minimum wage.
The size of the problem is very small.
And in Fall 2022, the Raise the Wage Act is on the Ohio Ballot
You can read the petition on the attorney general’s website here: https://www.ohioattorneygeneral.gov/getattachment/3d285cd7-aeea-4c65-948c-b1cea8a2da3a/Raise-the-Wage-Ohio-(Re-Submission).aspx.
This is bad legislation, and even more so by attempting to change the constitution. Ohio voters may want to pass this because they think it is going to do some good, but the good part will be swamped by the bad.
In another post, I wrote about the US raise the wage act introduced in 2021. (see https://econdatascience.com/understanding-the-minimum-wage-effects-on-the-economy)
The CBO said the act if passed, would reduce employment by 1.4 million persons, but in this post, you can see that only 1.091 million are currently paid at or below the minimum wage. The disemployment effects would be devastating. The CBO said it would lift 0.9 million out of poverty. But in that post, I show that poverty is already falling.
The worker who faces disemployment is the least productive among all of the low-wage workers. An employer having the potential of hiring a dropout with poor job skills and a student in college will almost always take the ‘better’ hire. At an extreme, the former never gets work and needs it the most, while the latter will, on their own, grow into a better job as they complete their education. So the minimum wage hurts those who advocates suggest it should help the most.