Minimum Wage Workers vs. Low Income Earners – Approximately 25% of US Workers Make Less Than $10.50/Hour

Any discussion about the minimum wage is surely going to include speculation about the impact increasing minimum wage would have on the economy. It is likely that at least one person is going to point out that only 1.7 million individuals, or approximately 2% of the work force, earn minimum wage in an attempt to minimize the suggested impact raising the minimum wage might have. What those attempting to make this argument fail to take into account is that there is another 2.2 million individuals that, as of 2011, had wages below federal minimum wage. This brings the number of US workers at or below current federal minimum wage up to approximately 3.8 million workers, or 5.3% (source).

Further, this line of reasoning fails to take into account those between current minimum wage and whatever we wish to propose as a new minimum wage. So, if we are going to talk about changing the minimum wage, what should we choose as our proposed new minimum?  There is a great article over at Dissent Magazine that crunches some numbers in response to Obama’s State of the Union call to raise the minimum wage to $9.00/hour.  I am going to choose to use what in this article is described as “a commonly cited bench mark” that adjusts “for inflation using the basic consumer price index”, $10.50. So, lets take a look at some numbers and see if we can figure out how many workers would have their earnings directly increased by increasing the minimum wage to $10.50.

The Center For Economic And Policy Research released a report in 2012 that breaks down the percentage of “Low Income Earners” across multiple countries. In this report they define Low Income Earners as those earning less than 2/3 of the national medium income. They go on to point out that in the United States approximately 24.8% of workers fall into the category of Low Income Earners.  Lets do the math, Wolfram Alpha is kind enough to produce the hourly median US income of $15.95 for us and 2/3 of $15.95 comes out to $10.63. So, we now know that close to 25% of US workers would see direct increases in their pay as a result of a minimum wage increase to around $10.50.

Now that we know this it is important to look at who employs the majority of the nations Low Income Earners. While many believe that our nations small businesses, the engine of our economy according to many politicians, are the major employer of minimum wage and low income earners the reality of the situation might surprise you. According to a data brief by the National Employment Law Project “the majority (66 percent) of low‐wage workers are not employed by small businesses, but rather by large corporations with over 100 employees”. Further, “top executive compensation averaged $9.4 million last year at these firms, and they have returned $174.8 billion to share holders in dividends or share buybacks over the past five years”. Finally, of the top 50 Low Income Employers “92 percent were profitable last year; 78 percent have been profitable for the last three years; 75 percent have higher revenues now than before the recession; 73 percent have higher cash holdings; and 63 percent have higher operating margins(a measure of profitability)”. It should also come as no surprise to anyone that the largest employer of low income earners, by an enormous margin, is Walmart.

While by many measures our economy may be recovering but low wage industries are growing faster than the rest of the economy.  According to this table by the Bureau of Labor and Statistics 7 of the 10 largest growth occupations between 2010 and 2020 are low income occupations. Of even greater concern, our low income jobs are those that are the lowest hanging fruit in terms of potential for automation.  The implications of this are explored in greater detail in another article of mine, Where are all the jobs?.

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