Few better examples exist on how two people can look at the exact same thing and see it differently than the minimum wage.

To come away from a recent editorial in a local newspaper, “Hawaii’s workers could use a raise,” and having read nothing else about the minimum wage, you could be forgiven for believing that simply raising Hawaii’s minimum-wage rate would, ipso facto, lift people out of poverty into the middle class and finally put housing affordability within their grasp.

Abundant evidence begs to differ.

All informed discussion about the minimum wage must by necessity start with the “Characteristics of the minimum wage workers” reports put out annually by the U.S. Bureau of Labor Statistics.

Excerpt from a chart from the U.S. Bureau of Labor Statistics, March 2019. 

In the 2018 edition of the report, the latest, readers will find that in the very first paragraph minimum-wage workers make up only 2% of all hourly paid workers in the nation — a far lower rate than the 14% a recent report stated live in Hawaii.

Statistical differences aside, the real issue is whether entry-level jobs would be cut if the minimum wage is increased dramatically.

According to the BLS report, minimum wage workers tend to be young.

Although workers under age 25 represented only about one-fifth of hourly paid workers, they made up just under half of those paid the federal minimum wage or less. Among employed teenagers (ages 16 to 19) paid by the hour, about 8% earned the minimum wage or less, compared with about 1% of workers age 25 and older.

Deep Data Dive

Just who are these minimum-wage workers?

After the release of one such BLS report, economist Jeffrey Dorfman, in an article in Forbes magazine, dove deeper into the numbers to find out more about who these minimum-wage workers were.

“Within that tiny group, most of these workers are not poor and are not trying to support a family on only their earnings. In fact, according to a recent study, 63% of workers who earn less than $9.50 per hour (well over the [federal] minimum wage of $7.25) are the second or third earner in their family and 43% of these workers live in households that earn over $50,000 per year.

“Thus, minimum wage earners are not a uniformly poor and struggling group; many are teenagers from middle class families and many more are sharing the burden of providing for their families, not carrying the load all by themselves.”

Using the word poverty to make a case that an increased minimum wage is needed to lift people out of it belies a good deal of complexity.

David Neumark, a national expert on the minimum wage writing for the Federal Reserve Bank of San Francisco, concludes “… evidence simply does not provide a strong case for using minimum wages to reduce poverty.

Similarly, recent research does not provide conclusive evidence that a higher minimum reduces government spending on welfare and other programs to support poor families, with the possible exception of food stamps.”

I will leave the last word on this to Michael Saltsman of the Employment Policies Institute.

“The best case against a higher minimum wage might be its irrelevance. Since the last increase in the federal minimum wage was fully phased-in in 2010, both the number and percentage of people earning it has fallen every year, as employees earn raises through their own initiative,” he wrote.

Saltsman continued: “Multiple studies confirm that a majority of minimum wage employees — who are disproportionately young and less-educated — earn a raise within one to 12 months on the job. For employees who are older and/or have children, better alternatives exist — including the Earned Income Tax Credit, which operates through the tax code instead of a mandate on employers.”

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