posted February 05, 2014 05:39 PM            

The Democrats, their union supporters, and liberals in general are making a hard and concerted push for an increase in the minimum wage. President Obama mentioned the subject prominently in his State of the Union address on Tuesday night and even promised to take executive action to increase the minimum wage federal contractors must pay their workers starting in 2015. While Republicans and small business owners are sure to resist this push, it is important that everyone on both sides debates the issue with the correct facts. Much of what you hear about the minimum wage is completely untrue.

First, people should acknowledge that this rather heated policy discussion is over a very small group of people. According to the Bureau of Labor Statistics there are about 3.6 million workers at or below the minimum wage (you can be below legally under certain conditions). That is 2.5 percent of all workers and 1.5 percent of the population of potential workers. Within that small group, 31 percent are teenagers and 55 percent are 25 years old or younger. That leaves only about 1.1 percent of all workers over 25 and 0.8 percent of all Americans over 25 earning the minimum wage.

Within that tiny group, most of these workers are not poor and are not trying to support a family on only their earnings. In fact, according to a recent study, 63 percent of workers who earn less than $9.50 per hour (well over the minimum wage of $7.25) are the second or third earner in their family and 43 percent of these workers live in households that earn over $50,000 per year. Thus, minimum wage earners are not a uniformly poor and struggling group; many are teenagers from middle class families and many more are sharing the burden of providing for their families, not carrying the load all by themselves.

This group of workers is also shrinking. In 1980, 15 percent of hourly workers earned the minimum wage. Today that share is down to only 4.7 percent. Further, almost two-thirds of today’s minimum wage workers are in the service industry and nearly half work in food service. Because this is where the minimum wage workers are, that is what we will focus on for the rest of this column.

Having established that the number of minimum wage workers is small and shrinking, that most minimum wage workers are not poor, and that most of them are young and working their way up the ladder rather than supporting a family, I want to bust one more myth about the minimum wage: the relationship over time between the minimum wage and labor productivity. This one is particularly obnoxious because those selling this myth almost surely know that they are advocating for their preferred policy on the basis of a lie.

Liberals have been trumpeting a study claiming that if the minimum wage had risen in tandem with worker productivity, the minimum wage would be nearly $22 per hour. Senator Elizabeth Warren (D-MA) has gone to great lengths to push this statistic into the policy debate. Liberals want you to believe that the minimum wage should have risen at the same rate as worker productivity to ensure that workers continue to take home the same share of the value of the output they produce. However, the statistic they quote is meaningless because it is not measuring the relevant concept.

Labor productivity may have risen faster than the minimum wage over the last twenty or thirty years, but the study getting all the press uses the productivity gains of all workers to calculate a hypothetical increase in the minimum wage. What is needed is a measure of the productivity gains of minimum wage workers.

Unfortunately, the government does not produce such a number. Luckily for the discussion at hand, the BLS does track labor productivity of food service workers. Because food service workers represent 44 percent of all minimum wage earners, this series is a pretty fair proxy for the productivity gains of minimum wage workers.

The BLS data show that in 2011 labor productivity gains in the food service industry were nonexistent (that is, equal to 0 percent). In 2012, it was slightly worse; labor productivity in the food service sector dropped by 0.1 percent. In limited service restaurants, where minimum wage workers are likely to be concentrated, labor productivity fell by 2 percent in 2012 while business owners saw their unit labor costs rise by 2.8 percent. Over the past few years, these workers, as a group, not only have not earned a raise, but they are getting paid more for doing less.

Taking a longer view, from 1987 to 2012 the same BLS data show that worker productivity in the food service sector rose by an average of 0.6 percent per year. In limited service restaurants, the gains were slightly lower, only averaging 0.5 percent per year. Meanwhile, unit labor costs have risen by an average of 3.6 percent. Over this period the minimum wage has risen from $3.35 to $7.25 per hour which is an average annual increase of 3.1 percent. In other words, at least in food service, the minimum wage has risen at a rate five or six times as fast as justified by the gains in worker productivity.

These numbers reveal not just the selective statistics employed by the proponents of raising the minimum wage, but also that the debate has little to do with helping the poor. Instead, this is really a debate about income redistribution. Raising the minimum wage is actually just an attempt by liberals to punish a subset of business owners by redistributing a share of their supposed wealth to their employees. It is just another attempt at class warfare. Unfortunately, in many cases (including restaurants), the minimum wage increase results in price increases paid by the customers; customers who may be no richer than the workers whose pay increase they are being forced to fund.

Comparing apples to apples, the facts change completely. If software engineers and mechanized manufacturing produce large gains in labor productivity that does not mean that minimum wage workers also became more productive. Focusing on the dominant minimum wage industry—food service—shows us the real story. In fact, the minimum wage has been pushed up much faster than any productivity gains by these workers.

posted February 06, 2014 07:44 AM            

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In a truthful debate we see that the minimum wage has been generous to workers receiving it when compared to the changes in the value of their output.

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yeah!!!

and they are lucky to have job, right ??

and why bother, only 3.6 million workers are concerned..

of which 86% are 25 years old or younger... so .... well ... so ... hmmmmm, why bother?

and... 63% of those 3.6 million worker are the second or third earner... why bother ? probably just working for fun... otherwise why would a second income be necessary?

well at least for 43% of them work is a pastime according to this article, considering they live in households that earn over 50.000$... and, by definition, do not need it, right?

neverminds if the rest, 2.052.000 (or 57%) does not live in households that earn over 50.000$ and does not work for fun.

really ... why bother ?

posted February 06, 2014 01:06 PM            

pire, the "second earner" issue has nothing to do with it! Why do they need another earner in the household? Because they can't survive on one persons earnings, duh. No mother working minimum wage is doing so for the fun of it. Professionals, maybe, but we're not talking about them here.

Many companies, big ones, are finding that better wages and benefits, and more, not less, staff, add to their profits and customer satisfaction. Many customers are finding that happier employees give better service, something sorely lacking at Walmart!

posted February 06, 2014 02:47 PM            

well, I consider that employees need job creators as much as job creators need employees if they want to increase their wealth (and develop a business beyond self-employment). therefore there is no reason for a job creator to look at himself as a god given gift to help humanity.. that is a delusion of grandeur masking his avidity

posted February 07, 2014 10:04 AM            

But, not in the Marxist Socialist Progressive bubble world of unreality.

In the real world, minimum wage jobs were never intended to fund the running of family households. They were part time jobs..or seasonal jobs, usually for students to earn a little spending money and gain some work experience.

But...welcome to the O'Bomber economy!

posted February 07, 2014 10:36 AM            

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In the real world, minimum wage jobs were never intended to fund the running of family households. They were part time jobs..or seasonal jobs, usually for students to earn a little spending money and gain some work experience.

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posted February 07, 2014 12:01 PM            

The seasonal work I was talking about was summer vacation from school.

posted February 07, 2014 12:04 PM            

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Originally posted by shura:
I swear this place is a wormhole to 1955.

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posted February 07, 2014 12:16 PM            

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But...welcome to the O'Bomber economy!

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posted February 07, 2014 01:05 PM            

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Wow, they really are not going to do it.

Democrats failed on Thursday to win enough Republican votes to reauthorize long-term unemployment benefits for more than a million workers cut off in December.

At least five Republicans needed to vote for the bill in order for it to advance, but only four did. The bill failed 58-to-40.

Even if the Senate eventually passes an extension of unemployment benefits, which seems unlikely, Republican leaders in the House of Representatives have been unenthusiastic about holding a vote.

More than 1.7 million long-term jobless Americans have missed out on benefits since the federal Emergency Unemployment Compensation program lapsed on Dec. 28. Since 2008, the program had provided extra weeks of benefits to laid-off workers who use up the standard six months of state benefits.

Democrats tried to sweeten the deal by banning millionaires from receiving benefits. Thursday's measure would have required unemployment claimants to certify they'd earned less than $1 million in the previous year; previously, there was no income restriction.....

^ I didn't know there was not income restrictions.

.....

I think this may be a big moment. Refusing to extend unemployment benefits, food stamp cuts, the war on Obamacare really are an escalation in the partisan wars that goes beyond "culture" or region or even race (although that still plays a big part in it.) The GOP is now positioning itself as the official "f.y." party, not even making the slightest attempt to appear to be "Christian" or "compassionate conservatives." They're not even deploying the usual trope about "the deficit" or "living within our means."

It's all the way down to the fundamental argument now: poor people deserve what they get. And if that is hunger, sickness and death so be it.

Not that we didn't know that:

In fact, they're so twisted, they've come to believe that they can declare up is down knowing that many millions of Americans will all nod in agreement:

"I believe it is immoral for this country to have as a policy extending long-term unemployment [benefits] to people rather than us working on creation of jobs," {Rep. Pete] Sessions said. "A job is the most important attribute, I believe, in a free enterprise system."

"Creation of jobs" means giving millionaires and corporations more tax breaks, in case you were wondering.

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posted February 07, 2014 03:00 PM            

Welcome to the O'Bomber economy.

Oh wait, I know what O'Bomber, the usual suspects and O'Bomber Kool-Aid drinkers say.

posted February 07, 2014 04:26 PM            

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22 million Americans are either unemployed or are working part time because they can't find a full time job.

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I've not assessed this statement for it's truth, but regardless this is the perfect reason for why unemployment should be extended. If there aren't enough jobs, then the people not getting them aren't lazy, are they?

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Oh wait, I know what O'Bomber, the usual suspects and O'Bomber Kool-Aid drinkers say.

Bush did it.

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posted February 08, 2014 10:50 AM            

Who cares what you think is the truth acoustic. You wouldn't know the truth if you stepped in it.

We're in the O'Bomber economy now...not the Great Recession. Pull your head out acoustic.

According to O'Bomber and his Socialist butt boys, the recession ended in June 2009.

Recession Ended 3 Years Ago This Month, Says National Bureau of Economic Research
June 11, 2012
http://cnsnews.com/news/article/recession-ended-3-years-ago-month-says-national-bureau-economic-research