Posts tagged ‘Minimum wage’

January 28, 2015

How many college graduates earn minimum wage?

by Grace

7.9% of minimum-wage earners have a college degree.  This translates to be about 260,000 workers

This and other minimum-wage facts are available from the U.S. Bureau of Labor Statistics.

50% of minimum age workers are age 16 to 24.

Most minimum-wage workers are not poor.  So while raising minimum wage would help some workers, it would probably not have much effect in reducing poverty.

… Less than a quarter of minimum wage workers live at or below the poverty line, while two-thirds come from families above 150 percent of the poverty line. In fact, the average family income of a minimum wage worker exceeds $53,000 a year.

President Obama continues to advocate for raising the federal minimum wage, and Oregon is currently engaged in a debate to raise it at the state level.

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Jeffry Bartash, “Breaking down who earns the minimum wage”, MarketWatch, Jan. 23, 2015.

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September 19, 2014

How does an increase in minimum wage affect employment figures?

by Grace

Economics professor Mark J. Perry explains a discrepancy seen in the debate on how increasing minimum wage affects existing employment figures.

… Most of the minimum wage debate centers on the issue of whether minimum wage increases have any effects on employment levels. Specifically, does the empirical evidence point to any significantly negative effects on employment levels following minimum wage hikes, as clearly predicted by economy theory? Some empirical evidence like the much-cited 1994 study by Card and Krueger found “no indication that the rise in the minimum wage reduced employment” at fast-food restaurants in New Jersey following a minimum wage increase to $5.05 per hour compared to nearby fast-food restaurants in Pennsylvania where the minimum wage remained constant at $4.25.

While then number of workers may not decline, the “number of unskilled work hours demanded by employers” does decrease.

Bottom Line: It’s more accurate to say that the Law of Demand predicts: a) a negative relationship between higher wages and the number of hours of unskilled work demanded by employers, rather than b) a negative relationship between higher wages and the number of unskilled workers employed. Therefore, it’s possible that a minimum wage hike won’t always negatively affect employment levels for entry-level unskilled workers, but will affect the number of hours demanded by employers for unskilled labor. That’s how we can reconcile the apparent inconsistency between economic theory and some of the empirical evidence…..

Other considerations factor into what actually happens when the minimum wage is increased, so results cannot be accurately predicted.  More details can be found by reading a section of Chapter 10 in Microeconomics: Theory Through Applications, v. 1.0 by Russell Cooper and A. Andrew John.

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Mark J. Perry, “The Law of Demand and the minimum wage: It applies to number of hours worked, not the level of employment”, Carpe Diem, September 14, 2014.

December 4, 2013

The effects of raising the minimum wage

by Grace

Raising the minimum wage may feel good, but don’t count on it to reduce poverty.

A town near Seattle may raise the minimum wage to $15 an hour. Massachusetts is debating raising the hourly minimum to $11. And in the nation’s capital, Senate Democrats are pushing a bill that could raise the federal minimum wage to $10.10.

Most minimum wage earners are between the ages of 16 and 24.

20131202.COCMinWageEarnersAreYoung2

… Less than a quarter of minimum wage workers live at or below the poverty line, while two-thirds come from families above 150 percent of the poverty line. In fact, the average family income of a minimum wage worker exceeds $53,000 a year.

How do workers making $7.25 per hour live in families making over $50,000 a year? Because most of them are not the primary income earner in their families—many are students. Over half of minimum wage workers are under 25, and better than three-fifths of those report being enrolled in school. Two-thirds of minimum wage employees work part time.

Raising the minimum wage would reduce entry-level jobs.

The larger problem facing poor families is a lack of employment opportunities. Only 9 percent of individuals in poor families work full time, while 25 percent work part time. Fully 67 percent do not work at all.

Raising the minimum wage would make this problem worse. Employers would respond to the higher costs by creating fewer entry-level jobs, making it harder for disadvantaged workers to gain the skills necessary to move into higher paying positions.

Raising the minimum wage would not reduce poverty rates.

A higher minimum wage would help some workers, but few of them are poor. The larger effect is hurting the ability of potential workers living in poverty to get their foot in the door of employment. A minimum wage hike might help politicians win plaudits from the press, but it wouldn’t reduce poverty rates.

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