AUTHOR: R Quinn on 9/06/2024
Minimum wage is a touchy, often political, subject and it is often misunderstood. I suspect not many HD readers are concerned with the minimum wage. On the other hand, I see implications of changing and not changing it.
Few workers actually earn the federal minimum wage. The percentage of hourly paid workers earning the prevailing federal minimum wage or less was 1.1 percent in 2023. Minimum wage workers tend to be young, single, work part-time, and have an high school or less education. Details are available from the Bureau of Labor.
Nearly 80% of minimum wage workers are employed in service occupations, mostly in food preparation and serving-related jobs. Interestingly, many also receive tip income not counted in hourly pay.
In large corporations such as Walmart, Costco, Verizon, GM, nobody earns the minimum wage.
Most states have a minimum wage requirement above the federal level. Raising the federal minimum wage would have minimal overall impact on American workers.
When I was 14 I earned below the minimum wage working for my town. When I was 18 I earned the minimum wage in my first job, but never again and like you I suspect trying to live on $7.25 or even $15.00 an hour would present a serious challenge. On the other hand, many retirees do so today. The annual equivalent of much talked about $15.00 and hour is $31,200 using the standard work year of 2080 hours. Household income could be double.
Thirty states have a minimum wage greater than the federal minimum, 13 states follow federal law and 7 have no minimum wage law effectively following federal law. Most of the states without a law are in the south.
The minimum wage itself is not the primary issue, rather it is what that income may buy. In other words, income relative to the cost of living in a state. For example, Alabama has a minimum wage of $7.25 and the average annual gap in the cost of living is estimated at $23,719. However, in California with a minimum age of $16.00, the gap is $52,737. The higher minimum wage may be less of a living wage.
There is somewhat of a debate as to whether a higher minimum wage contributes to a higher cost of living. However, to the extent businesses can pass along the added expense in prices and higher wages drive more demand for goods and services, a higher minimum likely does increase the cost of living. Could this mean that legally rather than economically driven higher wages can be counterproductive?
Raising the minimum wage has often overlooked implications – pay compression for one. Simply put, if a minimum wage goes from $7.25 to say $15.00, every worker earning $15.00 or above will demand higher pay. In theory, at least a near doubling of pay to maintain parity with the jobs previously paid $7.25. In addition, raising any wage carries added costs for a business such as payroll taxes, certain state employment taxes and in some cases employee benefit costs.
How to determine fair pay is an ongoing debate and no matter the direction there are consequences for everyone.
The article originally appeared on HumbleDollar.com.
QUINNSCOMMENTARY 
I didn’t know the minimum of wage was an issue anymore but maybe it is. The minimum has been irrelevant for decades since it doesn’t operate in the real world except in California where the leftist types ply their nonsense in droves.
The reason it is not an issue is that almost nobody works at that level. Your BOL stat says 1.1% of workers do but you would be hard pressed to find one.
In Georgia the state minimum is below the fed minimum so everyone just assumes the fed standard is the minimum. But wait, the McDonalds sign board in my small town says hiring at $13 and up. Others are competitive. Why would they pay so much? Because nobody will work for less is why. If anyone posts now hiring at 7.25 per hour in the window they will grow old waiting for a worker to show up. Remember, McDonalds is the type job that attracts the young and inexperienced. Try getting somebody with a few years work experience and at least a fully functioning brain and expect to pay more.
Finally, the idea of a national minimum is laughable because as you say it doesn’t cover regional and local living costs and anyway why would a 16 year old summer worker living at home be entitled to an annual “living wage”?
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Funny back in the day the only workers earning minimum wage were teens not adults supporting a family. Lack of education i think is a big part of that major reversal.
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Fair pay? Fair? What is that? I define fair as what I think is right for me.
Some think $15 is “fair”. Some think $50 is “fair”.
That federal minimum wage hasn’t changed in years should tell you something – that folks define “fair” differently.
If I have a “minimum” below which I won’t work, that should be up to me, and every other worker in America.
What other arbitrary number does the federal government embrace? For example, the government asserts the federal poverty level, measured as income, in the lower 48 is $15,060 in 2024. For comparison, 52 weeks at 40 hours a week is 2,080 hours @ $7.25 = $15,080.
Obviously, someone in the federal government thinks Americans are NOT in poverty where you work full time @ $7.25 an hour – effectively, for them, and their purposes, that $7.25 an hour is an appropriate minimum.
State minimum wage laws, are government dictates that 100 years or so ago, were unconstitutional – Article I, Section 10, Clause 1: “… No State shall … pass any … Law impairing the Obligation of Contracts …” Employment is a contractual relationship. And, the 10th Amendment once prohibited the federal government from establishing a federal minimum wage – as such actions are way beyond the limited powers granted by the constitution and its amendments.
And, of course, the same individuals who want to “Fight for $15” conveniently ignore the cost of Health Reform’s mandates that took effect, after a one year non-enforcement delay, starting January 1, 2015 – where a full time worker, with an “Applicable Large Employer”, must be offered “affordable”, “minimum essential coverage” of “minimum value” – coverage that, if enrolled as a family, likely adds to the cost of a minimum wage worker expense well in excess of another $15,000 (Kaiser 2023 survey shows annual cost of medical coverage among surveyed employers was $23,968).
Is it possible that existing costs from employment are an impediment to hiring individuals who have few skills and/or who contribute only modestly to the provision of services and products? Are you at all surprised that employment and technology are changing the worksite in places like McDonalds, and other such enterprises?
I am always surprised when I hear that 1 in every 8 adults at or below “prime” working ages (under age 55) once worked at McDonalds – like our current Vice President. https://www.today.com/food/restaurants/mcdonalds-1-in-8-initiative-rcna120187
In 1966, I voluntarily waited tables and painted the bleachers, and other stuff at my school for $1 an hour off my tuition. A few years later, I too was working for minimum wage, $1.60 an hour if I remember correctly. And, a few years after that, I volunteered my draft and was again earning below minimum wage in the Army (even if you only count 40 hours a week, which of course, it never was).
No complaints here. Just concern.
What a loss it would be to America if a significant number of entry level jobs start to disappear!
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