Surprising facts about the minimum wage

For years I've had fun at cocktail parties by asking this question: what percent of all the people who work in the U.S. are paid minimum wage or less? Of the hundreds of people I've asked, only one has come even close to the right answer. The vast majority of the answers I've received (try it yourself!) range from 10% to as much as 50%, when the correct answer is 2.3%. Most people mistakenly think the minimum wage affects a significant portion of the working population, and that's why politicians are able to exploit the minimum wage issue for political gain.

The facts can be found in a recent BLS publication: Characteristics of Minimum Wage Workers, 2014:

In 2014, 77.2 million workers age 16 and older in the United States were paid at hourly rates, representing 58.7 percent of all wage and salary workers. Among those paid by the hour, 1.3 million earned exactly the prevailing federal minimum wage of $7.25 per hour. About 1.7  million had wages below the federal minimum. Together, these 3.0 million workers with wages at or below the federal minimum made up 3.9 percent of all hourly paid workers. 

According to these BLS figures, there were roughly 131.5 million wage and salary workers in 2014, and the percentage of all the people working who were making minimum wage or less was (1.3 + 1.7)/131.5 = 2.3%. Further, only 1.3% of all those who work in the U.S. made less than the minimum wage (1.7/131.5), and 97.7% of those who work made more than the minimum wage without any help from government fiats.

But here's where it gets really interesting: "Almost two-thirds of workers earning the minimum wage or less in 2014 were employed in service occupations, mostly in food preparation and serving-related jobs." In other words, 66% of those making minimum wage or less work in restaurants, where they undoubtedly take home more than minimum wage if you count their tip income. That means last year there were only about 1 million people in the U.S. who actually made minimum wage or less. More than 99% of those who worked last year took home more than the minimum wage for their efforts.

So the next time you're at a cocktail party, ask the person next to you to guess the percentage of U.S. workers that earn minimum wage or less. You won't be lying when you tell them it's 1% or less, and if they don't believe you, tell them the facts can be found in a recent BLS publication.

Raising the minimum wage would presumably benefit less than 1% of the working population, but it would probably make it harder for young and inexperienced workers to get a job. It's already hard enough: the unemployment rate for those aged 16-19 is over 20%. Politicians should be lobbying to reduce or eliminate the minimum wage, not increase it.

(This post updates some facts from a similar post early last year.)

HT: Mark Perry, who adds more color to the issue.