Saturday, July 26, 2008

Minimum Wage Myths

On today I found this extra-shoddy piece of editorial disguised as 'Latest News'.

For years the media have been distorting the truth about the minimum wage in order to gain sympathy for raising it. This piece is a textbook example of this type of shoddy reporting. In fact, I think they probably just keep this same story in a 'Boilerplate' directory on their computer networks and trot it out every so often and just update the numbers.

First of all there shouldn't even be a minimum wage. When you artificially set a floor on the price of a good, then you necessarily restrict the demand for it at some given levels. That is just basic economics.

And there is plenty of research that demonstrates that the minimum wage hurts precisely those workers it is designed to help: low-income teens from poor neighborhoods. If there were ever an example of the "We-Must-Do-Something-To-Be-Seen-Doing-Something" style of politics, this is it. Perhaps that is why one of its biggest champions has been Ted Kennedy.

So, let's begin carving up this story, shall we? First we have the title, "Minimum-wage workers live on the edge". Ooh, sounds scary, doesn't it? It's supposed to. Of course, like Obama's message of unspecified change, it really doesn't tell us much. If one lives on the edge of a cliff, a crevasse, an abyss, well, yes, that is bad. But if one lives on the edge of a golf course, a lake or a nude beach, being on the edge can be all right.

Next, following the formula for puff pieces like this, the writers tell us a sad story about someone who is affected by whatever it is they are blowing the lid off of, in this case, the evils of the minimum wage. This article is no exception. We are told a story about Timothy Davis, a 21-year-old who works full time at Wendy's in Atlanta. It describes Timothy's struggle to make ends meet while working for minimum wage for five paragraphs.

This is hugely disingenuous because it is anecdotal evidence and does not give the reader a sense of the proportion of the problem. Also, in this case, it is a bad anecdote upon which to base your argument. The article's opening sentence tells us that three months ago Mr. Davis decided to rent an apartment and move out on his own.

Ok. Let's stop right there. When politicians and reporters demagogue this issue they always portray the minimum wage as something which it is not and was never intended to be. The minimum wage is an entry level wage. It is the least amount of money the law will allow you to work for. It is not designed to be a wage upon which one can build a life, buy a house or support a family.

So, even though the article is trying to get me to sympathize for Mr. Davis, already I don't because in the first sentence the writer has already told me that Mr. Davis has poor decision-making skills. If he is working in a fast-food restaurant and is making minimum wage, Mr. Davis should have looked at moving in with some friends so the rent would be cheaper and the cost of the utilities can be shared. Or perhaps he should be living at home until he can get some kind of job training that will allow him to earn more. What he shouldn't be doing is living in an apartment by himself in a major metropolitan area.

After five paragraphs, the authors finally give us some context of the problem. We are told that, "[a]ccording to the Bureau of Labor Statistics, 2.3 percent of American hourly workers -- 1.7 million people -- are paid at or below the federal minimum." That is 2.3 percent of hourly workers, not all workers. We are told that 1.7 million people are working at minimum wage. According to that same Bureau of Labor Statistics, in 2006 the size of the entire US workforce was 151.4 million people. In other words, this is a problem for 0.011 percent of the total workforce. Kind of puts things in perspective.

Let's read on a bit further, shall we? In paragraph eight we learn that, "[m]inimum-wage earners tend to be unmarried part-time workers in service-industry jobs who are under 25 years old and have not completed high school." In other words, the average minimum wage earner is the most uneducated and unskilled worker in our workforce. Frankly, at $6.55 these workers are likely overpaid, not underpaid. If what you are doing takes no education and no skills, how much do you really expect to make at that particular endeavor?

Paragraph eleven begins with this sentence, "About 60 percent of minimum-wage employees work in the leisure and hospitality industry, primarily food and drink establishments. However, many of these employees receive tips as a significant portion of their income." In other words, not even all of that 1.7 million figure cited in paragraph five are really even earning minimum wage. So really we are talking about less than 0.011 percent of the workforce. Hardly an epidemic.

The article continues on to describe the hardships that such workers endure, such as "find[ing] ways to cut corners, watering down milk and filling up on 'cheap and filling carbohydrates instead of protein,' which can lead to health problems". We are told that Mr. Davis "doesn't buy gasoline, choosing instead to rely on Atlanta's mass transit system."

A Google search turned up a link to the Employment Policies Institute's website that informs the reader that "[t]he average family income for employees who will 'benefit' from the recently enacted $2.10 minimum wage hike is $46,889. Why? Six out of seven of these employees either live with their parents or relatives, have a working spouse, or are single and don't have children." In other words, six out of seven minimum wage earners are not, like this story's lead, Mr. Davis, "living on the edge".

And here is another fact that's editori - that is, "reporters" don't think you need to know.
Virtually all minimum wage employees will see their incomes rise as they increase their value to employers by gaining skills through experience. Analysis of US Census Bureau data shows the median raise these employees receive is six times higher than that of employees earning above the minimum wage.

This traditional growth out of entry-level employment explains why less than 1% of employees above the age of 25 are working at the minimum wage.

In short, CNN is guilty of playing fast and loose with the facts in this so-called news story to give its readers a distorted picture of the plight of the minimum wage worker.

I know. You're shocked.


Jonathan B. said...

Nice post. The other thing that I think gets left out of these types of discussion (not just about minimum wage) is the fact that when labor wages go up, so does the price of goods like are provided by unskilled labor, basic things like food. And so, like inflation, a lot of of the wage hike is erased by the fact that the prices of basic goods goes up.

Alain DeWitt said...


You make a great point, as usual. Thanks for stopping by and the comment.


Bill said...

I was kind of hoping CNN or perhaps NBC (National Barack Channel) would do a story on just how many minimum wage employees were either let go or not hired when the wage went up recently. Still waiting.

Alain DeWitt said...


What can I say, but, "Amen, brother!"