Who Works for Minimum Wage?

by Michael on Mar 4, 2013 · 1 comment

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Ever wonder who works for minimum wage? Well, wonder no more… The Bureau of Labor Statistics has released data summarizing the characteristics of minimum wage workers.

This is particularly timely given the current debate over raising the minimum wage.

In 2012, there were 75.3 million workers aged 16 or above who were paid at hourly rates. That works out to roughly 59% of all wage and salary workers. Care to guess how many earned minimum wage?

Well, about 1.6 million of these individuals earned the Federal minimum wage of $7.25/hour and another 2 million earned less than the minimum wage. So a little under 5% of all hourly workers earned minimum wage or less.

Note that those being paid less than minimum wage don’t necessarily represent violations of the Fair Labor Standards Act as there are a number of legitimate exceptions to the law.

Exceptions to the minimum wage requirement can, under certain circumstances, include: workers with disabilities, full-time students, individuals under age 20 in their first 90 days of employment, tipped employees, and student-learners.

As for who is actually earning minimum wage…

  • Minimum wage workers are typically young. About a fifth of all hourly paid workers are under age 25, but that age group accounts for about half of those paid the Federal minimum wage or less.
  • Women are more likely than men to earn minimum wage. In fact, approximately 6% of women earning hourly wages were paid at or below minimum wage vs. 3% of men.
  • Asians are least likely to earn minimum wage, African Americans are most. 3.4% of hourly Asian workers earned at or below minimum wage vs. 4.7% for White workers, 5% for Hispanics, and 5.3% for African Americans.
  • Those who have been married are less likely to earn minimum wage. But they’re also older than those who have never been married so this is probably not a fair comparison. Regardless, if you’re curious, the rates are 2% vs. 8%.
  • Part-time workers are more likely to be paid minimum wage. Part-time is defined here as less than 35 hours/week — and 11% of these workers are paid minimum wage or below vs. 2% for full-timers.
  • Your occupation matters. By far the highest fraction of those earning minimum wage or less (12.1%) were in the service-related jobs. In fact, roughly 60% of minimum wage workers were in service occupations, primarily food prep and serving. However, many of these individuals also receive tip.
  • Your industry matters. The industry with the highest proportion of minimum wage workers was leisure and hospitality. This was largely driven by the same factors as above — restaurant and food service workers are often paid at or below minimum wage, though many earn tips.
  • Geography matters. Between 7-8% of workers in Louisiana, Oklahoma, Texas, and Idaho earned minimum wage or less vs. under 2% in Alaska, Oregon, California, Montana, and Washington. However, this latter group (plus a few others) have state minimum wage higher than the Federal rate.
  • Fewer are paid minimum wage than in the past. The fraction of hourly workers earning minimum wage declined from 5.3% in 2011 to 4.7% in 2012, both of which are far lower than the 13.4% rate in 1979.

Overall, these numbers are not terribly surprising. The pool of minimum wage workers is skewed toward younger workers and those in the service industry.

One of the biggest surprises (to me) was the low fraction of hourly workers that are actually earning minimum wage (or below). I would’ve expected more than 5%.

Of course, with proposals to increase the minimum wage from $7.25/hour to $9.00/hour, many more individuals would be affected since anyone earning less than the new minimum wage would see receive a pay increase.

Source: BLS.gov

1 Kurt @ Money Counselor March 4, 2013 at 12:55 pm

Minimum wage at even $9 per hour works out to about $18,000 per year, before payroll and, if any would be due, income taxes. Can you imagine trying to live on that, anywhere in the US, especially if you were single? You’d have to get a second job or work overtime, at the least.

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