Minimum Wage Primer

December 16, 2013

With recent calls for increasing the minimum wage, Americans need to understand how it impacts labor markets and whether it works as an antipoverty tool, says Ben Gitis, a policy analyst at the American Action Forum.

  • The federal minimum wage was first introduced in 1938 as part of the Fair Labor Standards Act.
  • The Labor Department had found that nearly 25 percent of children were working 60 hours a week for a median weekly wage of $4 ($1.14 per hour, in today's dollars).

Today, proponents of increasing the minimum wage cite its effectiveness as an antipoverty tool. However:

  • Very few people earn the minimum wage. In fact, minimum wage workers account for only 1.9 percent of all wage and salary workers.
  • In 2011, 78.7 percent of minimum wage earners were not in poverty.

Moreover, increasing the minimum wage could actually increase the income gap, rather than decrease it, as proponents claim. This is because there is a disproportionate number of people earning the minimum wage who are teenagers in families with incomes well above the national average.

  • In 2011, 36.6 percent of people working hourly minimum wage (or below) jobs were teenagers living at home, whose families had average incomes of $103,964.30.
  • Increasing the minimum wage could limit earnings for the jobless while increasing earnings for others.

The minimum wage assists very few people who actually are in need. Increasing it would not alleviate poverty, but would actually increase poverty and give higher wages to families who need it least.

Source: Ben Gitis, "Primer: Minimum Wage and Combating Poverty," American Action Forum, December 3, 2013.

 

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