Minimum Wage Workers

Russ Roberts points out one of my favourite little factoids about the US minimum wage: how few people actually earn it.

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%:

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%.