Wednesday, November 08, 2006

Let's Do Something - Even If It Does Nothing Good

So it now looks like all the minimum wage initiatives have or will pass - in Arizona, Colorado, Missouri, Montana, Nevada and Ohio. And voters in these states can pat themselves on their backs, deluding themselves that they have moved millions into a better life. Too bad it isn't true.

The whole argument in favor of raising the minimum wage has been something like this - an employee who earns $5.15 an hour and works full-time earns only $10,712 a year, which is too little. There is then this image that somehow huge swathes of people make do on $10,712 a year, often a guy supporting a wife and a few kids - truly a tragedy!

Unfortunately, it's a big hoax! According to the BLS (yes, I spend my spare time digging around in these places!), only 1.4% of all full-time workers make at or below the minimum wage. 71.9% of those workers are in the leisure and hospitality industry, where tip income, not wages, dominates take-home pay. That alone means that the targeted group is about 0.4% of employees. But wait, there's more:

6.3% of minimum wage earners are below the age of 25, a good number of whom are possibly high school or college students.

62% of minimum wage earners have never been married, while only 24% are currently married.

Ok, and save the best for last. You know all the hoopla of how the minimum wage adjusted for inflation is the lowest since 1955. I don't know if that's true, but here's what BLS data tells us ...

The percentage of hourly paid wage earners earning at or below the minimum wage has fallen from 13.4% in 1979 (and 15.1% in 1980) to a mere 2.7% in 2004!

Even more worrying than merely the increase in minimum wage is that the minimum wages are tied to inflation, with no upper cielings (except in Nevada, where the increase is capped at 3%). That means if, say oil prices surge, we could have a cost push inflation spiral that could result in stagflation!

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