July 19, 2013

Who makes minimum wage?

MinimumWage_640pxThe controversy over Washington, D.C.’s “living wage” ordinance, which may prompt Wal-Mart to pull out of as many as six new stores planned for the city, has drawn new attention to those near the bottom of the nation’s wage ladder. The ordinance would require large, non-union retailers to pay their workers above the District’s $8.25-an-hour minimum wage. But who are minimum-wage earners, exactly?

Perhaps surprisingly, not very many people earn minimum wage, and they make up a smaller share of the workforce than they used to. According to the Bureau of Labor Statistics, last year 1.566 million hourly workers earned the federal minimum of $7.25 an hour; nearly two million more earned less than that because they fell under one of several exemptions (tipped employees, full-time students, certain disabled workers and others), for a total of 3.55 million hourly workers at or below the federal minimum.

That group represents 4.7% of the nation’s 75.3 million hourly-paid workers and 2.8% of all workers. In 1979, when the BLS began regularly studying minimum-wage workers, they represented 13.4% of hourly workers and 7.9% of all wage and salary workers. (Bear in mind that the 3.55 million figure doesn’t include salaried workers. But BLS says relatively few salaried workers are paid at what would translate into below-minimum hourly rates. Also, 19 states besides the District have minimum wages higher than the federal standard; people who’d be minimum-wage workers in those states aren’t included in the 3.55 million total.)

People at or below the federal minimum are:

  • Disproportionately young: 50.6% are ages 16 to 24; 24% are teenagers (ages 16 to 19).
  • Mostly (78%) white; fully half are white women.
  • Largely part-time workers (64% of the total).

MinimunWageTableThey work in industries that you might expect: Just over half (51%) work in the leisure and hospitality industry, about 16% in retail, 9% in education and health services, and the rest scattered among different sectors. Broken down occupationally, the picture is similar: Nearly 44% are in food-preparation and serving-related occupations; 15% are in sales and related occupations, and the rest are scattered.

They’re also more likely to live in the South than anywhere else. In the West South Central states (Texas, Oklahoma, Arkansas and Louisiana), 7.3% of hourly workers make the federal minimum or less — the highest rate among the nine Census Bureau regions —  followed by the South Atlantic (5.8%) and East South Central (5.7%) regions. In the Pacific region (California, Oregon, Washington, Alaska and Hawaii), by contrast, only 1.5% of hourly workers earned the federal minimum or less.

Economists continue to debate the extent to which minimum-wage laws reduce poverty, income inequality and/or overall employment. What’s clear, though, is that after a three-step increase in 2007-09, today’s minimum wage buys more than it did recently, but its real purchasing power is about where it was four decades ago — and below its late-1960s peak.

Topics: Economics and Personal Finances, National Economy

  1. Photo of Drew DeSilver

    is a Senior Writer at the Pew Research Center.

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20 Comments

  1. Jc Jones4 days ago

    I honestly hate to post a stupid question. When we talk about people earning the minimum wage, are we talking about people earning $7.25 an hour as a threshold? Are those earning say, $7.26 an hour not included in the numbers? What about those earning $7.75 an hour? Lets just be honest. The difference between $7.25/hr and $7.26/hr a year is $20.80 a year. The $.50 difference: $1,040. Then lets talk take home pay. $.50 cents an hour equals $86 a month. I’m just curious if the research includes any data for those slightly above minimum wage or not.

    Reply
  2. Mike2 weeks ago

    dol.gov/whd/state/tipped.htm – Implying tipped employees aren’t paid minimum wage isn’t entirely accurate.

    Reply
  3. Howard3 weeks ago

    I would be interested in seeing the graph adjusted to show how much federal aid a person making minimum wage might receive, and how much it has changed since 1960.
    Since we are talking about a ‘living wage’ it implies its purpose is to help those who have to attempt to support a family on the wage. In that vein federal and state aid would add to the income.

    Reply
  4. Mike2 months ago

    I’d be more interested in statistics that show the financial situation of those working minimum wage jobs. The protests are about a “living wage”. What percentage of minimum wage earners actually have to “live” off their wages? I suspect the vast majority of minimum wage earners are supplementing household income, as I did as a teenager working for gas/party money.

    Reply
    1. Titanium Dragon1 week ago

      About a third of people who earn minimum wage, and a bit over 40% of those who make below living wage, are the sole breadwinners for their household.

      Reply
  5. Steve C8 months ago

    The reference to the percentage of workers at or below the minimum wage relative to the total number of workers is meaningless due to exclusion of states with minimum wages above the federal level. Just five of those states – California, Florida, Ohio, Michigan and Massachusetts – represent over 25% of the nation’s employees, but no minimum wage workers in those states are acknowledged relative to the total labor market.

    Comparing the total number of workers in all states to the number of minimum wage workers in only some of them is making a comparison of dissimilar data; i.e., comparing apples to oranges.

    Reply
    1. Drew DeSilver8 months ago

      The post was careful to state that it was talking specifically about the percentage of workers at or below the *federal minimum wage*. We kept the focus there for a couple of reasons. First, as one of our other commenters noted, the federal minimum acts as a uniform floor — it applies even in states that have no set minimum wage in their own laws, or one set below the federal minimum. A minimum-wage worker in Ontario, Oregon makes considerably more than a minimum-wage worker just across the border in Payette, Idaho; combining both sets of workers in the same analysis didn’t seem to make much sense.

      And as a practical matter, since we wanted demographic and occupational breakdowns of minimum-wage workers and those data come from BLS, we would had to adopt their definitions anyway.

      I do agree that If individual states with higher-than-federal minimums did the same kind of analysis, with the same definitions, in such a way that they could be readily combined with the BLS numbers, we’d have a fuller and more nuanced picture of the minimum-wage workforce in different parts of the country (I’d be interested, for example, to know how the demographic/occupational profile of minimum-wage workers in Washington State, for example, is similar to or or different from an otherwise-comparable state that has only the federal minimum.) But absent such data, it seemed to us that sticking with the uniform federal-level data made the most sense.

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      1. Steve C8 months ago

        A statement such as: “In the Pacific region (California, Oregon, Washington, Alaska and Hawaii), by contrast, only 1.5% of hourly workers earned the federal minimum or less” is of little value if you fail to note that the only state in that region in which it’s not illegal to pay employees at or below the federal minimum wage is Hawaii, which represents less than 3% of the jobs in the region.

        Similarly, the comparison between now and 1979 is pretty much meaningless because of the increased number of state laws mandating pay above the federal minimum wage, even if only by a few cents per hour. The fact that the percentage of workers earning federal minimum or below in the South Central region (which has no states with floors above the federal minimum) is virtually the same as the 1979 average suggests that in fact no demographic/job change has actually taken place over that time period in terms of the percentage of the workforce working for minimum wage. The statement “they make up a smaller share of the workforce than they used to” is probably due solely to state laws mandating higher pay. The data actually suggests that in fact the percentage of workers earning the legal minimum in the location they work in (whatever it might be) is probably unchanged.

        In fact, the majority of the apparently meaningful facts suggested by the article – regional and temporal differences in the percentage of minimum wage workers, etc. – appear to be primarily due to the impact of those laws rather than any demographic or economic factors. Ignoring that factor results in a study which is pure but of little value. (The demographics of the minimum wage workers and the industries they work in are probably valid observations, but that’s not particularly new or informative.)

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      2. AC8 months ago

        You’re giving the impression here that you don’t understand the criticism of your statistical analysis. The original poster is right and these analytic errors in your article are not matters of opinion.

        Reply
        1. Drew DeSilver8 months ago

          I totally agree that looking just at who makes the federal minimum by definition undercounts the total number of minimum-wage workers in states with higher-than-federal minimums. And in hindsight I should have noted that that would affect the regional percentages (although I did note at the end of the third paragraph that the BLS analysis I relied on excludes minimum-wage workers in states with higher-than-federal standards).

          I can’t say whether or not the fact that a smaller share of hourly workers earn at or below the federal minimum than 30+ years ago “is probably due solely to state laws mandating higher pay,” though I’m sure such laws are a factor. One would have to do a state-by-state analysis of job growth in states with and without higher-than-federal minimum wage laws to answer that question; while that would be an interesting and worthwhile piece of analysis, that’s not what I was trying to do here. The main intent of the post was to look at the demographic and occupational characteristics of minimum-wage workers, and those data come from BLS, which means they’re keyed to the federal minimum.

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          1. Ron3 months ago

            To find out how many and which types of employment might be affected by the proposed change in the MW, can you look at who makes the proposed minimum wage or less?

            Might also be interesting see how much folks like these contribute to the tax rolls. But not just Federal Income Tax, as they probably pay none. They all will, however, pay state and local sales taxes, possibly state income taxes, vehicle registration taxes, federal and state gasoline taxes, … . Their monthly rent will allow their landlords to pay state real estate taxes, local home owner insurance, … .

            Thanks.

        2. Dan2 months ago

          Steve’s analysis is also flawed. He took a number of statistical correlations and suggested a causual relationship with no data to back it up.

          He may well have valid points, but words like “probably” and “appear to be” with no roots in data don’t make the argument correct. He is just as guilty of the errors of interpretation as he suggests the author of this article is.

          Reply
      3. DJ Crane2 months ago

        It would also help to see comparison of minimum wage with cost of living differences by states. Just as some international comparisons use the “Big Mac” as a comparative tool, it seems US minimum wage in some lower cost states could contribute to a higher standard of living than state minimums in higher cost states.

        More importantly, we should pay attention to “liveable wage” where a person who works 50 hours a week (at one or more jobs) or a couple who works a combination of 60 hours per week should earn enough support themselves and family – rent, food, clothing, transportation, and perhaps something toward retirement and college education. Spending too much time and attention on minimum wage at the very bottom of the compensation spectrum will keep the society from addressing a much broader and more fundamental disparity in pursuing “greatest good for greatest number” and aspirations that helped create and sustain our country.

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    2. BpF2 months ago

      This complaint is like buying an apple and later complaining it is round and doesn’t taste at all like banana.

      Reply
  6. Bill Bateman9 months ago

    I like your informational post.

    I find it interesting that many in the food business have a couple benefits that don’t “show”. #1 – they often have tips and those amounts are usually in excess of what’s reported #2 – most that I know eat food from the restaurant they work at a large discount that is not reported as an economic benefit.

    In the 2nd category I would suggest that a lot of commissions are paid in addition to the minimum wage base.

    I think the Government needs to stay out of this issue

    Reply
    1. FDR4 months ago

      Your naivete about tips and the food industry is astounding. You don’t know that their part of their tips are withheld in the form of taxes thanks to St. Reagan’s policy of robbing from the working poor and middle classes to ingratiate the rich.

      You also don’t know that most sit down restaurants have a policy of pooling their tips so that 10 – 20 percent tip on the bill is actually split amongst the cooks, bus boys, hostesses, etc.

      Third, there is a percentage (approximately 20%) that don’t tip at all.

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      1. Matt4 months ago

        While some of Steve’s comments are valid some are just picking the data apart to prove his view without much in the way of facts. The article is for the most part on point to the premise it s trying to illustrate. Not a lot of people make the federal minimum wage. Approximately $1.5 million. And you certainly should not include tipped employees as their average minimum is above the federal minimum. I have not talked to any tipped employees that average out to $7.25. If they do they move to a higher volume restaurant. I am not why withholding in tips is pointed out as bad by FDR. Certainly he should expect workers to pay taxes on their earnings. Which by the way many of them don’t as they get it back in refunds.
        So the article is correct – all this hub bub about the importance of raising the minimum wage is a waste of time as it impacts so few and is appropriate for entry level jobs. Minimum wage jobs are not meant to be the primary source of income to raise a family and in fact rarely is as you can see because most of the minimum wage earners are students or first year employees. One last point, wages are suppose to be set to be the fair price to pay for services rendered, not how much one needs to pay their bills. How much should you pay a high school student to ask you if you want cheese on your burger? It is not hard. I know, I did it for years while pursuing what would be my more permanent job to support my family.

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    2. Joe W.2 months ago

      One thing people seem to forget is that this data is talking about people who currently earn the minimum wage. If it is raised, it will affect more people. So the real need is now to compare the above data with the additional number of people that will be earning more.

      Secondly to address another point that was mentioned, it is extremely important to address the difference in service industry jobs that have tips and those that don’t. There is a growing trend in food service to have, “fast casual” restaurants, which are more like fast food, and workers tend not to be tipped, or if they are the tips are very low.

      Reply
  7. Chris Peterson9 months ago

    I believe this article does a disservice to the discussion of the minimum wage in our society, given that it only focuses on those who earn at or below the FEDERAL minimum wage, but excludes those who are paid at or below their given STATE minimum wage. Thus, you are comparing two dissimilar data points (minimum wage workers in 1979 vs. today). I would’ve expected a more rigorous analysis from the Pew Research Center… if Mr. DeSilver could please post updated figures documenting those who earn at or below their state’s minimum wage, or at least note in his analysis that the drop between 1979 and today could be attributed to increases in state-specific minimum wages compared to the federal standard during that time, that would be greatly appreciated.

    Reply
    1. Jess9 months ago

      “…it only focuses on those who earn at or below the FEDERAL minimum wage, but excludes those who are paid at or below their given STATE minimum wage. Thus, you are comparing two dissimilar data points (minimum wage workers in 1979 vs. today)…”

      State minimum wage laws vary. Five states have no minimum wage laws, and four states have a minimum wage below the federal rate. Employers in those nine states must pay the FEDERAL minimum wage. Another 22 states set their minimum wage right at the FEDERAL rate.

      19 states (and DC) have a STATE minimum wage that is HIGHER than the FEDERAL minimum. It is only those workers earning MORE than the FEDERAL minimum wage that are not counted here – and they shouldn’t be, because this is an examination of the purchasing power, by national average, of the FEDERAL minimum wage over time. It is NOT a comparison of the federal minimum wage to the wages paid in those states with a higher rate.

      The FEDERAL minimum wage and those STATE minimums are DISSIMILAR data points to compare for this purpose.

      Now, if you’d like to compare the minimum wage rate paid in Alabama (a state with no minimum wage) to that of California (a state with a rate higher than the federal minimum wage), then you also need to adjust for the relative local purchasing power of that wage – or you’ll once again be trying to compare apples to oranges.

      Reply