Although some workers benefit -- those who were paid the old minimum wage but are worth the new one to the employers -- others are pushed into unemployment, the underground economy or crime:Good intentions don't make for good legislation.
Because most increases in the minimum wage have been slight, their effects are difficult to disentangle from other factors that affect employment:
- The losers are therefore likely to lose more than the gainers gain; they are also likely to be poorer people.
- And poor families are disproportionately hurt by the rise in the price of fast foods and other goods produced with low-skilled labor because these families spend a relatively large fraction of their incomes on such goods.
- But a 40 percent increase would be too large to have no employment effect; about a tenth of the work force makes less than $7.25 an hour.
- Even defenders of minimum-wage laws must believe that beyond some point a higher minimum would cause unemployment, otherwise why don't they propose $10, or $15, or an even higher figure?
UPDATE (February 9, 2007): Glen Whitman writes about how the minimum wage debate is largely symbolic on both sides, though this time it could be different.
UPDATE (September 6, 2007): I just came across this interesting post at the Coyote Blog about how minimum wage changes affect his specific business.
UPDATE (October 10, 2007): Here's a nice summary of U.S. minimum wage worker statistics, including:
According to the U.S. Department of Labor, the median annual income of a U.S. worker is $32,140. Federal minimum wage is currently $5.85 an hour, or about $11,500 per year — just above the poverty line. Of the 76.5 million people paid by the hour in the United States in 2006, 2.2% make minimum wage or less. Here are some generalizations we can make about minimum wage workers:UPDATE (November 25, 2012): There has been an accumulation of evidence that a moderate minimum wage is a net benefit, improving both wages and employment in some cases (reference to The Economist, Nov. 24, 2012, p. 82, "Free exchange: The argument in the floor").
- Most minimum wage earners are young. While 2.2% of all hourly workers earn minimum wage or less, just 1.4% of workers over the age of 25 are paid at or below the Federal minimum wage. More than half (51.2%) of minimum wage workers are between 16 and 24 years old. Another 21.2% are between 25 and 34.
- Most minimum wage earners work in food service. Nearly two-thirds of those paid minimum wage (or less) are food service workers. Many of these people receive supplemental income in the form of tips, which the government does not track.
- Most minimum wage earners never attended college. Just 1.2% of college graduates are paid the minimum wage. If you only have a high school degree, you’re more likely (1.9%) to be paid minimum wage. Those without a high school degree are nearly three times as likely (3.7%) to earn minimum wage. 59.8% of all minimum wage workers have no advanced education.
- Finally, as you might expect, part-time workers are five times more likely to be paid the minimum wage than full-time workers.