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The Minimum Wage Is a Ladder, Not a Stepstool

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The Minimum Wage Is a Ladder, Not a Stepstool

October 12, 2015

Is it getting harder to move beyond a minimum wage job? That is the question considered in Ben Casselman’s new post at FiveThirtyEight. Casselman argues that more and more workers are finding themselves stuck earning at or near minimum wage for years at a time. In other words, the minimum wage is less of a ladder to more career opportunities and more of a stepstool, where workers can only climb so high.

But is that the reality? Casselman asserts that the typical minimum wage worker looks less like the classical view of a teenager working his first job and more like an experienced adult struggling to support her family. According to the analysis, minimum wage workers are getting older: in 2014, half of minimum wage workers were above 25, up from 40 percent in 1995.

This statistic is true, but it does not tell the whole story. While minimum wage workers are more likely to be older, older people are less likely to be minimum wage workers. According to data compiled by the Bureau of Labor Statistics, people of all age groups are less likely to earn at or below minimum wage today than in the late 1990s.

In 1999, the earliest year for which BLS compiled the data, 4.6 percent of all hourly-paid workers earned at or below the federal minimum wage. This fell to 3.9 percent in 2014. For workers aged 16 to 24, this share fell from 10.2 percent to 9.4 percent over the same period. For workers aged 25 or older, the decline was from 3 percent to 2.5 percent.

 

 

The graph above illustrates this trend over the past 15 years. For the most part, the share of workers earning minimum wage has steadily declined. The one exception was the 2006 to 2009 period, when a 41 percent hike in the federal minimum wage from $5.15 to $7.25 coincided with a major economic downturn. In the current economic recovery, the share of workers earning the minimum wage continued to decline as it did before the recession.

Rather than minimum-wage jobs shifting from younger people to older people, as Casselman implies, employees across the age spectrum are more likely to earn above minimum wage. However, the rate of minimum-wage employment for young people has fallen faster than it has for older people—giving the impression that minimum-wage jobs have shifted to older people, when in reality everyone with a job is less likely to be earning minimum wage.

This is the good news. Now for the bad news. While the share of workers earning minimum wage has fallen universally, the same is not true for total employment. Specifically, people over 25 have seen hourly employment increase over 11 percent during the past fifteen years, while individuals aged 16 to 24 have seen a decrease of 6 percent. Younger people have seen fewer minimum wage jobs precisely because there are fewer jobs for them, period.

 

 

The central problem of the economic recovery is not that older people are stuck in minimum wage jobs. Quite the opposite—the economic recovery has been biased in favor of the old. The labor force participation rate for young people is only 55 percent, compared to 83 percent for those aged 25 to 54. The unemployment rate for young people is over twice that for older individuals.

The minimum wage, far from being a tool to advance people out of poverty, is actually holding back younger people. According to a study by Jonathan Meer and Jeremy West of Texas A&M University, minimum wage increases have the strongest negative employment effects on young people—and hardly any effect for people over 35. If a higher minimum wage is considered necessary, one remedy would be to create a two-tiered minimum wage: a lower standard for young people and a higher one for older people. 

While those who occupy minimum wage jobs are skewing older—and thus may be stuck in them for longer—older people are less likely to find themselves in these jobs in the first place. The minimum wage remains the first rung on the economic ladder, and policymakers should make sure it stays within reach.

 

Preston Cooper is a Policy Analyst at Economics21. You can follow him on Twitter here.

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