Minimum Wage, Maximum Impact

I was challenged in another forum recently because I had indicated that fewer than 5% of the workforce was at minimum wage. She had heard differently:

I heard earlier this week on the radio that the $10.10 hourly proposed minimum wage would affect 28 million people. That sounds like a good deal more than the 5% of the workforce …  According to the website, there are currently about 155 million people in the US labor force. So, in round numbers, 28 million is closer to 20%, not 5%. That’s one-fifth of the labor force, and doesn’t even consider any dependents affected.

Here was my response:

It must be true, if you heard it on the radio!

Well, actually, it is approximately true in a sense — but you were perhaps misled. Consider: According to the US Bureau of Labor Statistics, in an article from a year ago, “An estimated 3.6 million people were paid hourly rates at or below the federal minimum in 2012, down from 3.8 million a year earlier.”

This is less than 5% of all hourly workers, and far less than that as a percentage of the total workforce, less than 4%.

However, many millions would be affected by an increase. Most of the current minimum wage workers would keep their positions and thus make more per hour, but many others will be terminated because of the higher cost. Millions more will not be hired because of the artificially inflated cost, and this is sad because it eliminates their chances to get a start being independent and productive citizens.

And, of course, there would be strong incentives to reduce the hours for current minimum wage employees. Perhaps Obamacare has done a bit of a favor here, as it already provided tremendous incentives to cut the hours of employees even without the impact of a minimum wage drag on the economy.

Of course, the increase will cause a boost to union labor, as many union contracts are indexed to the minimum wage — which is why unions are pushing for this. This adds many more millions to those “affected,” as the radio item said, by a minimum wage hike.

In the larger sense, almost everyone in the country will be affected by the negative impact on the economy and the resulting higher prices for essentially all goods and services. But they weren’t talking about that. Nor were they describing the additional impetus to move anything offshore that could be moved, because of these higher costs. That will cost jobs and GDP as well.

So: My “less than 5%” number was correct. It is, counting all workers, much less than 5% of the workforce. Nevertheless, the impact of this will be much larger.

===|==============/ Keith DeHavelle