The Minimum Wage

(Topics: The Economy | Back to Home)

Most people know we have a minimum wage in the U.S. It's $7.25 an hour (more in some states and cities), and if you have an hourly job under most circumstances, you must be paid at least this amount.

Beyond that, there's a lot of confusion. Some facts:

• Almost no one is paid exactly minimum wage. [1] Literally, 0.1% of the working population. So it's not much of a wage floor.
• Actually way more people are paid less than the minimum wage [2].
• Most of those paid low wages are young people who don't support themslelves.
• No, servers in restaurants aren't paid $2.13/hour. If, counting tips, they make less than minimum wage, their employer is required to make up the difference.
• BUT, people learning less than $13/hour are extremely likely to be victims of wage theft fraud by their employers.

Basically, the goal of the minimum wage is to protect workers. It was created in the 1930s, and yes, FDR intended for it to be a "living wage." Obviously, though, you couldn't live on $7.25 an hour. It would be difficult to have a comfortable life on twice that.

The minimum wage is basically nonsense today. If we removed it, it's not as if a bunch of companies would slash pay. Remember, almost no one is at that floor. And where the minimum wage has been increased, the results have been mixed.

The minimum wage is a phantom issue. We can raise it, and there will be some unpredictable effects, or we can get rid of it and there probably be no significant effects, but changing the minimum wage is not the magic answer.

There is a single problem, which is the slow disappearance of jobs for every day people. The problem is the bottom of the labor market is disappearing.

Don't worry about minimum wage. Focus on the jobs that are available—those that are disappearing, and why.

[1] https://www.bls.gov/opub/reports/minimum-wage/2020/home.htm

[2] Mostly people with disabilities