Minimum Wage Issues

NCPA Brief Analysis: The Minimum Wage: No Wages, Not Low Wages

The minimum wage is a hurdle that trips up the least skilled, say many economists. And increasing the federal minimum wage beyond its current level of $5.15 an hour will do far more to hurt the poor than to help them.

The reason most low-income families have low incomes is not because of low-wage jobs. According to data from the U.S. Census Bureau for the 12 months just prior to the last minimum wage increases:

  • Only 15 percent of low-wage workers are in the lowest-income families, and most of those who earn low wages are either teen-agers or other secondary earners from families across the income distribution (see figure).

  • Only 23 percent of working-age family members in the highest-income families do not work, while 65 percent of the people in families with less than $10,000 of income do not have a job.

  • On average, over 40 percent of the adults in low-income families never graduated from high school, while fewer than 4 percent of the adults in the highest-income families are high school dropouts.

Thus lack of skills is an important reason so many in low-income families are out of work, and the primary cause of low income is no wages -- not low wages.

A long line of research concludes that increasing the minimum wage reduces employment among the least skilled. The 1990-91 increase in the minimum wage from $3.35 to $4.25 reduced employment by from 3 percent to 11 percent for teen-agers and poorly educated adults. And following the 1996-97 increase in the minimum from $4.25 to $5.15, the employment rate of teen-agers and poorly educated adults has yet to achieve the levels of 1989.

Source: Donald R. Deere (associate director, Bush School of Government and Public Service at Texas A&M University), "Don't Raise the Minimum Wage -- The Bar Is Already Too High," Brief Analysis No. 270, June 9, 1998, National Center for Policy Analysis, 12770 Coit Rd., Suite 800, Dallas, Texas 75251, (972) 386-6272.

For text go to http://www.ncpa.org/ba/ba270.html

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