By Deborah D. Thornton
Liberals decry the fact that the minimum wage hasn’t been raised since 2009, and talk about “income inequality” and “fairness.” So how much is the minimum wage, who earns it, and why?
The Federal minimum wage is $7.25 per hour, before overtime. When first established in 1938 it was 25 cents. In 1979, when the wage was $2.90 over 20 percent of workers were earning either at or below the minimum wage. I know – I was one of them. As an 18-year-old I worked at a fast-food restaurant, making minimum wage. Most workers who earn “at or below” minimum wage earn tips. To qualify as a tipped worker you must make at least $30 per month in tips. In Iowa the minimum cash per hour for a tip worker is $4.35.
Today only 4.3 percent of workers make the minimum wage or below, about 50,000 in Iowa. Yet, two-thirds of us started out making minimum wage. What happened to us? Who is making this wage in 2014? In Iowa we have about 116,000 people or 8 percent of our people employed in the Accommodation and Food Service sector, out of about 1.5 million total non-farm workers. The median wages in Iowa in this sector are $13.10 per hour or triple the minimum.
Unsurprisingly, the vast majority of minimum wage and tip workers are, as I was, young people. Even of those 16-24 years old, only 19 percent earn minimum wage, and most of those are high school kids. Over 80 percent of our young workers earn more than minimum wage – even with entry level job skills and no work experience. Three out of four only work part-time, again as I did, and the average total family incomes are almost $66,000. If not in high school, they’re in college. They are neither married nor a main wage earner. They remain at that wage for less than a year. These are the facts.
Only 4 percent of minimum wage workers are single parents working full-time, or about 2,000 people in Iowa. Only 2,000 people of 1.5 million. In most cases the stereotype of a minimum wage worker being a mother or father struggling to make ends meet is simply not true.
But shouldn’t we do something to help these 2,000 people? What we need to do is help them improve their skills and make their work more valuable, so that they may be promoted and earn more. We should not take jobs and opportunity away from them!
That is what will happen if the minimum wage is raised. When the wage is raised, the number of people hired goes down. There are fewer entry-level jobs and fewer opportunities to gain skills. At the same time the competition increases. If the employer is forced to pay $15/hour for a job they know is only worth $8, they will hire the most skilled person. They will not hire the unskilled and uneducated. Neither the single parent nor the student will be hired.
The actual average wage in Iowa is $19.52 per hour. This is a “livable” wage. Rather than artificially increasing the minimum wage we have to help workers advance to this level based on their ability and qualifications. The Skilled Iowa Initiative certificates can do this; so can programs such as iJAG – Iowa Jobs for America’s Graduates – which teach employment skills.
Raising the minimum wage will only result in fewer jobs and more people on unemployment. If you can’t get your first job, how can you get your second? Starting work at minimum wage is not a bad thing, I did, and almost all of us did. Not having a job at all is a very bad thing.
The views expressed in this column are those of the author and not necessarily those of the Public Interest Institute. They are brought to you in the interest of a better informed citizenry.
Deborah D. Thornton, Research Analyst, Public Interest Institute, 600 North Jackson Street, Mount Pleasant, IA 52641-1328. Ph: 319-385-3462, Web site: www.LimitedGovernment.org. Contact her at Public.Interest.Institute@LimitedGovernment.org.